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China’s lithium market, a critical source of battery raw materials, is experiencing a fresh bout of volatility as investors react to possible supply disruptions and tougher government oversight.
By Ryan Chigoche
Lithium carbonate prices on the Guangzhou Futures Exchange jumped by the daily limit of 8% last Friday, closing the week 14% higher. The exchange then moved to curb speculative trading, triggering a sharp drop in futures prices on Monday.
Shares of leading Chinese producers, including Tianqi Lithium Corp. and Chengxin Lithium Group Co., have also climbed about 25% in Shenzhen since the start of the month.
Fears over future output and Beijing’s push to cut industrial overcapacity have helped fuel the rally. The uncertainty has spilled over to international markets, pushing up physical spodumene prices and sparking sharp moves in global futures contracts.
Traders say the market remains highly sensitive to developments in China, the world’s top producer and consumer of lithium.
Price swings are not new for the sector. Spot prices peaked at nearly 600,000 yuan (US$84,000) per ton in late 2022 but collapsed to around 60,000 yuan (US$8,400) earlier this year amid oversupply and slowing electric vehicle (EV) battery demand.
That plunge has stoked expectations that authorities will act to support the market and avoid further supply chain disruption.
Jiangxi Province, home to China’s lithium hub of Yichun, is drawing intense scrutiny. Known for its spodumene and lepidolite reserves, Jiangxi is forecast to supply about 10% of the world’s mined lithium in 2025, according to Benchmark Mineral Intelligence.
Officials in the province recently ordered eight mining firms to submit updated reserves reports by the end of September after audits revealed irregularities in approvals and registrations. Analysts believe the crackdown signals a stronger stance on compliance and could be used to tighten supply if needed.
Some producers are already adjusting operations. Jiangxi Special Electric Motor Co. has suspended lithium salt production at its Yichun plant for 26 days for cost savings and maintenance.
In June, Sinomine Resource Group Co. halted a project in the province for six months to upgrade its technology. Tighter controls are also spreading beyond Jiangxi. Authorities in Qinghai Province last month ordered Zangge Mining Co. to stop illegal mining activities.
While the immediate hit to output is limited, analysts warn that broader enforcement could cut supplies significantly if inspections intensify nationwide.
China’s dominance of the global lithium supply chain means any disruption has worldwide repercussions. The country is not only a leading producer but also the largest refiner of the metal, which is vital for EV batteries, smartphones, and energy storage.
Current volatility comes at a difficult time for the global EV industry, which faces rising costs and uneven demand. Although sales remain strong in markets such as China and Europe, some automakers have scaled back battery orders as they manage inventory and changing consumer preferences.
A tighter Chinese lithium market could push up costs for battery manufacturers everywhere, affecting EV affordability and potentially slowing the energy transition. Market participants are closely watching whether Beijing will introduce further measures, especially in Jiangxi, where compliance audits are ongoing.
For now, it is unclear if the government intends to deliberately curb supply to support prices. But the combination of inspections, production cuts, and speculative buying has already made China’s lithium sector one of the most volatile commodity markets in 2025.
