A Recovery Built on Tight Supply
A year ago, the contract was changing hands at around 74,000 yuan a ton. Tighter mine supply and strong exports lifted it, and utility-scale batteries added a new source of demand. CATL's Jianxiawo mine in Jiangxi was halted again in early August after regulators revoked its environmental approval, and BMI cut its 2026 output forecast for the project to 32,000 tons of lithium carbonate equivalent from 62,500. Zimbabwe also suspended exports of lithium concentrates and other unprocessed minerals in February, before allowing limited shipments under a quota system in April. Prices then rose almost 13% in the week to August 15, with Datt Capital attributing part of the move to downstream buyers locking in orders ahead of the new battery consumption tax. The main contract fell 7.41% in a single day on September 4, after the Shanghai Metals Market revised its inventory methodology and lifted its weekly stock estimate to 169,300 tons from just over 70,000. Higher output in Australia, where Mineral Resources is restarting its Bald Hill mine after an 18-month suspension, has also weighed on prices.
Doubts About Mid-Term Demand
Adam Megginson, principal lithium price analyst at Benchmark Mineral Intelligence, said the concern is "not about immediate demand, but worries regarding demand resilience in the mid-term." The doubt is whether consumption can stay strong enough through the end of 2026 to absorb the cell output produced recently. Trade barriers, especially in the EU, add to the worry. China's passenger NEV retail sales fell 12% between January and July, preliminary CPCA data show, after the full purchase-tax exemption was cut to a 50% discount. NEV penetration still reached a record 64.4% of passenger car retail sales in July. Storage is doing better. BloombergNEF counts 307 GWh of global additions in 2025, with the gigawatt total up 48%, and expects 459 GWh this year.
A New Tax on Batteries
A 2% consumption tax on lithium-ion batteries took effect on September 1, ending an 11-year exemption, and doubles to 4% in September 2027, under rules the finance ministry, customs and tax authorities announced on July 17. Sodium-ion and solid-state batteries, both alternatives to lithium-ion, are exempt until the end of 2028, and GF Securities expects exported batteries to fall outside the tax scope. If producers absorb the cost entirely, JPMorgan calculates, 2026 net profit at affected companies would fall 3% to 16% and net margins would narrow by about 0.4 to 0.6 percentage points. The levy is not limited to lithium-ion. Vanadium redox flow batteries, another energy-storage technology, nickel-metal hydride and lithium primary batteries are also taxed at 2%, while photovoltaic cells follow from April 2027.
Beijing's Construction Pause
Regulators warned battery makers twice this year against adding too much capacity. Now, Caixin reports, they have paused construction of new power and energy-storage battery projects until a year-end review of industry capacity. A separate Shanghai Securities News report said plants already approved or being built would go ahead, while those still in planning could be suspended. If that is how the review ends, can storage demand grow fast enough to absorb S&P Global's expected 109,000-tonne surplus?