Lithium prices have sunk to a five-month low as the return of previously idled mine capacity triggered fears of a massive market oversupply. Lithium prices on the Guangzhou Futures Exchange (GFEX), the most active lithium carbonate contract, fell to 136,800 yuan ($20,210) per tonne on Wednesday, nearly 30% below their multi-year highs reached in mid-May. The sharp pricing downturn is linked to a wave of accelerating mine restarts and expansions across China and Australia. Last month, China’s EV battery giant, Contemporary Amperex Technology Co. (CATL), secured a safety production permit for its flagship Jianxiawo lithium mine in Yichun. The permit clears the final regulatory hurdle to restart production after a nearly one-year suspension, bringing ~3% of global supply back online.
CATL’s Jianxiawo mine was suspended in August 2025 after its operating license expired during a broader regulatory crackdown on environmental compliance, waste management and tailings safety in Yichun, China’s largest lithium mining hub. The project contains an estimated 960 million tonnes of porcelain stone ore, equivalent to roughly 2.66 million tonnes of lithium oxide, and is capable of producing 100,000 to 150,000 tonnes of lithium carbonate equivalent (LCE) annually. At full production, Jianxiawo supplies roughly 3% of global lithium output and between 8% and 10% of China’s domestic production.
Australian producers are also accelerating new supply after lithium prices rebounded earlier in the year. In May, Mineral Resources (MinRes) restarted its wholly owned Bald Hill mine, reversing its November 2024 decision to place the operation on care and maintenance. Bald Hill is capable of producing about 165,000 tonnes of spodumene concentrate annually. The company had already restarted the much larger Wodgina mine, which it owns jointly with Albemarle Corp. (NYSE: ALB). Wodgina has nameplate capacity of 750,000 to 828,000 tonnes of spodumene concentrate per year, making it one of the world’s largest hard-rock lithium operations. Meanwhile, MinRes and China’s Ganfeng Lithium are spending A$490 million to expand the Mt Marion mine, increasing processing capacity from 500,000 tonnes to 600,000 tonnes of spodumene annually.
In the same month, Core Lithium restarted mining operations at its Finniss Lithium Operation in Australia's Northern Territory after a two-year hiatus following the lithium price crash. Back in March, the company managed to secure a financing package to the tune of $290 million (US$207 million) to cover construction and production ramp-up. This included a A$120 million institutional equity raise alongside debt facilities and convertible notes from Glencore Australia, InfraVia Capital and Nebari Holdings.
The open-pit mine aims to ramp up to a steady nameplate capacity of 214,000 tonnes per annum of spodumene concentrate by mid-2028.
And lithium markets are now bracing for robust supply in the coming years.
Global lithium production is projected to grow 26% Y/Y to reach 2.16 million tons in 2026 and 27% in 2027 to hit 2.74 million tons. Supply is expected to continue expanding over the next two years, reaching 3.34 million tons in 2028 before hitting 4.02 million tons in 2029.
However, analysts have pointed out there's a clear price disconnect in lithium markets at the moment.
Indeed, lithium futures traders are aggressively front-running the projected surplus in the coming years, with near-term demand for electric vehicles and grid-scale energy storage remaining exceptionally strong. Global EV sales continue to climb, with projections of 23 to 24 million electric cars sold worldwide in the current year, accounting for over 70% of total battery deployment. Electric cars now represent nearly 30% of all new vehicle registrations globally, a massive increase from prior years.
In the meantime, technology companies are rapidly deploying battery storage alongside AI data centers to avoid years-long grid connection delays. That expansion is creating a fast-growing new source of lithium demand. Utility-scale battery deployments have continued to surge as operators race to stabilize grids against intermittent wind and solar outputs. Last year, global battery energy storage systems (BESS) capacity increased by 40% Y/Y to a record 108-112 gigawatts (GW), with utility-scale deployments accounting for 80% of capacity additions.
By Alex Kimani for Oilprice.com
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