The price of lithium carbonate has fallen below 110,000 yuan, with mining enterprises forced to hold the pressure, battery manufacturers facing intercepted capital flows, and energy storage operators getting squeezed from both sides.

The price of lithium carbonate has plummeted, the market is trading on long-term oversupply, and all links of the industrial chain are under pressure.

Foresee Energy notes that on October 12, the main contract of lithium carbonate futures closed at 104740 yuan/ton, with a single-day plunge of 11.79%, marking the first time it closed below 110,000 yuan since December last year. The spot battery-grade lithium carbonate also fell below 110,000 yuan simultaneously. As of press time today, the price has still broken through the 110,000 yuan mark.

Inventories across the industrial chain are still being destocked, and there has been no cliff-like decline in the production scheduling of lithium iron phosphate, but the futures market has used a big bearish candlestick to price in the expectation of "oversupply next year". Foresee Energy believes that this round of decline is not pricing the current supply and demand, but the long-term story that the global lithium market will shift from shortage to oversupply in 2028.

For downstream battery manufacturers, automakers and energy storage integrators, cheaper raw materials are certainly a good thing, but the collapse of prices at such a speed has instead made procurement decisions more difficult: the more prices fall, the more hesitant people are to buy, and the less people buy, the further prices fall.

Futures are trading on "long-term oversupply", and spot resilience is suppressed

Let's look at the expectations first. Wang Meidan, an analyst at CITIC Futures, believes that the current supply-demand pattern is still relatively tight, but the pricing focus of the market has shifted to next year. The Global Metals team of Goldman Sachs also released a research report in early October, predicting that the global lithium market will shift from supply shortage in 2026 to supply oversupply in 2028, and the average spot price of lithium carbonate in China will drop to 84,000 yuan/ton in 2028.

Changes on the supply side are also reinforcing this narrative. On October 8, the public notice on the proposed acceptance of the environmental impact assessment for the Xiashwo Lithium Mine in Yichun was restarted. The approval progress of this world's largest single lepidolite mine has directly strengthened the expectation of domestic supply increment. At the same time, shipments of ores from Zimbabwe have resumed, the resumption permit for large-scale lithium mines in Brazil has been issued, and the expectation of concentrated arrival of African ores at ports has been fully priced in.

The demand side is also not to be ignored. The retail sales of new energy passenger vehicles in September declined year on year, and cathode material enterprises have low willingness to restock; the goods hoarded by traders during the earlier rebound phase were sold off in a concentrated manner after the price turned down, forming a negative feedback of "decline - sell-off - accelerated decline". In October, the month-on-month growth rate of production scheduling across the entire lithium battery market has dropped to single digits, and there are market rumors that some cell manufacturers have revised down their subsequent production scheduling plans.

However, inventory data tells a different story. The full-caliber inventory has continued to be destocked from early June to the end of September, and the production scheduling of lithium iron phosphate in December is expected to hit a new high for the year. The gap between strong reality and weak expectations is widening, and the futures market has chosen to trade on the latter. This choice may not be rational, but the futures market has never been designed to reflect the present.

Battery manufacturers' costs have decreased, but profits may not be retained

With the lithium price falling, battery costs have indeed decreased. CATL purchases a large amount of lithium carbonate externally every year. For every 10,000 yuan/ton drop in price, the corresponding cost saving is at the level of billions of yuan. Calculated from the high point in May to the present, the total amount of such savings is quite considerable.

But this sum of money has to go through several hurdles before it can be recorded in the profit statement. CATL has a clearly defined price adjustment mechanism negotiated with its customers that links to the market prices of materials such as lithium carbonate. After the raw material cost decreases, the selling price of products may also be adjusted simultaneously. Farasis Energy responded very restrainedly to this question on the investor interaction platform, only stating that "the drop in lithium carbonate price is expected to reduce the company's operating costs" without giving more optimistic profit guidance.

The more fundamental problem lies in the competitive landscape. Automakers are compressing the bargaining power of battery manufacturers by supporting second suppliers and building their own battery production capacity. CATL's domestic gross margin in the first half of the year decreased year on year, and the comprehensive gross margin in the second quarter also declined month on month.

How much of the money saved from the falling lithium price can remain in the pockets of battery manufacturers does not depend on the price of lithium carbonate, but on the bargaining position of battery manufacturers in the industrial chain. Cost dividends never automatically turn into profits; they need to be fought for at the negotiation table.

Energy storage benefits the most directly, but cost transmission is blocked in the intermediate links

With the lithium price falling from above 200,000 yuan to below 110,000 yuan, the unit cost reduction of energy storage systems is real. However, the cost transmission in the energy storage industry is far from as simple as "the lithium price falls, and the system becomes cheaper".

The pricing mechanism of energy storage cells has undergone profound changes in the past two years. It is reported that from 2022 to the end of 2023, energy storage cells were completely priced following lithium carbonate prices; from 2024 to mid-2025, when lithium carbonate prices went down unilaterally, cell enterprises widely adopted the "fixed-price lump sum" long-order model; since July 2025, the pricing logic has further evolved to link three raw materials at the same time: lithium carbonate, electrolyte and electrolytic copper.

This means that lithium carbonate is no longer the only variable affecting energy storage costs. When the lithium price falls, the prices of electrolyte and copper foil may not fall synchronously, so the actual decline in energy storage system costs is smaller than the market expectation.

The more tricky part lies in the transmission path. Cell manufacturers pass the cost changes linked to multiple materials to integrators, who then pass them to the property owners, but the bidding framework and budget system of large power investment groups are not prepared to accept the complex linked price adjustment mechanism. As a result, cost pressure accumulates in the integration link: integrators face fluctuations from the upstream, and cannot fully pass on the pressure to the downstream.

This anxiety has already been reflected in actions. Canadian Solar said it will control costs through large-scale procurement, price linkage and hedging. Some energy storage integrators have begun to purchase lithium carbonate directly to lock in the cost of cathode materials, and at the same time participate in lithium carbonate futures hedging to hedge price fluctuations. The competitive factors of integrators are extending from system integration capabilities to risk management capabilities for upstream resources. What energy storage integrators need is a predictable cost range, not a continuously falling "bottom".

The 110,000 yuan mark has been broken, but the real test is not here. The Yichun mica mine is playing a repeated game on the profit and loss line, and some medium-sized ore dressing plants have temporarily stopped production for maintenance. The costs of salt lake lithium extraction and integrated spodumene enterprises are far lower than the current price, and they will not exit the market just because the lithium price falls to 100,000 yuan. The price bottom of lithium carbonate is not determined by the average cost of all production capacities, but by the cash cost of marginal production capacities.

The key signals in the next two months lie in terminal production scheduling and inventory data. If terminal consumption weakens in the fourth quarter, lithium carbonate may shift from destocking to restocking as early as December. The prices that are currently suppressed by expectations will not truly face the test of fundamentals until then.