Lithium prices surged to their highest levels in more than two years this week, extending a sharp rally driven by tightening supply and rising demand.
Benchmark prices for battery-grade lithium carbonate and hydroxide have jumped sharply, with Fastmarkets’ CIF China, Japan and South Korea assessments pushing above US$20,000 a ton.
Spodumene, the lithium-bearing mineral produced by Australian miners, also climbed above US$2,000 a ton for the first time since October 2023.
The rally has prompted brokers to reassess their outlooks. Broker Bell Potter this week lifted its price forecasts for spodumene to US$1,750 a ton by year-end, up 89 percent from its previous estimate of US$925.
While still conservative compared with more bullish projections that expects prices to peak around US$3,250 a ton this year, the upgrade signals a wide shift in sentiment across the sector.
Momentum has been particularly strong in China, where lithium prices jumped after Beijing announced changes to export tax rebates for battery products. The finance ministry said value-added tax rebates on battery exports will be reduced from 9 percent to 6 percent from April and scrapped entirely from January 1, 2027.
While the policy does not directly apply to lithium carbonate, investors expect battery makers to accelerate exports ahead of the deadline, lifting near-term production and, in turn, lithium demand.
That expectation helped push the most-active lithium carbonate contract on the Guangzhou Futures Exchange to its daily limit earlier this week. The contract closed at 156,060 yuan a ton (around US$22,300), its highest level since November 2023 and up more than 160 percent from last year’s lows.
Analysts have also pointed to low inventories in China, now at their weakest levels since mid-2024, which has positioned the market to be increasingly sensitive to shifts in demand.
Activity in derivatives markets also suggests the rally is also drawing in a broader set of participants. The Chicago Mercantile Exchange (CME) said trading volumes in its lithium hydroxide futures reached a record 8,296 tons in the first full week of 2026, surpassing the previous high set in early 2025.
“With the recent surge in spot prices and market activity it’s great to see that volumes are following the price trend,” said Przemek Koralewski, Fastmarkets’ global head of market development. “What a year ago was considered a very strong month, in volume terms, can now be traded in a week, pointing to an increase in available liquidity in the market.”
The rally comes after what analysts widely describe as one of the lithium market’s most punishing periods in recent memory. The sector entered 2026 following a prolonged downturn driven by deep oversupply, weaker-than-expected electric vehicle demand, and sustained price pressure that forced producers to cut output and delay projects.
In 2025, lithium carbonate prices in North Asia fell to four-year lows, reflecting the fallout from years of aggressive capacity expansion. Prices began to recover in the second half of last year as supply discipline tightened and inventories started to draw down.
By late December, lithium carbonate had risen roughly 56 percent from its January 2025 lows. Whether the rally will be sustained will depend on how quickly new supply comes online and whether demand growth meets expectations this year.
Securities Disclosure: I, Giann Liguid, hold no direct investment interest in any company mentioned in this article.
