Geopolitical Conflicts Reignite, Why Lithium Carbonate Has Not Shown the Same Frenzy as 4 Years Ago in China

March 4th, News

Recently, the escalation of geopolitical tensions has brought volatility to the global energy and commodity markets. As a core raw material for the new energy industry, lithium carbonate experienced a sharp price increase due to the Russia-Ukraine conflict in 2022, with prices surging nearly 100,000 CNY/ton in just one month, peaking at nearly 620,000 CNY/ton. However, after this round of geopolitical tensions, the lithium carbonate market has shown a "volatile but not skyrocketing" trend: the main futures contract hit the lower limit on March 3, without the unilateral price surge and speculative hoarding seen four years ago. Instead, it has exhibited characteristics of "primarily emotional disturbance with stable fundamental support." This stark contrast is due to profound changes in supply and demand dynamics, market mechanisms, and industrial ecosystems.

Looking Back at 2022: Geopolitical Turmoil Combined with Supply-Demand Mismatches Sparked a Wild Surge in Lithium Prices

Following the outbreak of the conflict, international energy markets experienced violent fluctuations, with Brent crude oil prices rapidly surging to $130 per barrel. European energy infrastructure was damaged, and the attack on the Nord Stream pipelines triggered a sharp spike in regional electricity prices, fully exposing the energy crisis.

High oil prices and high electricity tariffs are directly fueling a surge in demand for energy alternatives in Europe: Germany’s residential energy storage installations have surged in the short term, with monthly installations exceeding 100,000 units, and European energy storage orders have grown significantly. Meanwhile, rising fuel costs are prompting consumers to switch to electric vehicles, reinforcing the logic behind the replacement of traditional vehicles with new-energy vehicles and boosting expectations for lithium-battery demand.

2026 Contrast: Four Core Factors Lead to a Plunge in Lithium Prices

1. Concerns in the Middle East Energy Storage Market

The Middle East is an important emerging market for Chinese energy storage companies looking to expand overseas. The energy transition plans of countries such as Saudi Arabia and the United Arab Emirates, as well as the strong demand for electricity in countries like Iran, have previously spurred numerous intentions for cooperation on energy storage projects. Companies such as CATL and Sungrow have already made deep strategic investments in this region. However, recent geopolitical shifts have directly led to delays in the implementation of projects that Chinese companies have either already signed or planned to advance, and in some cases even pose risks of breach of contract. This could bring temporary pressure on Chinese energy storage and lithium-ion battery companies’ overseas expansion strategies.

2. February new energy vehicle sales decline sparks concerns in China

Since February, although major car manufacturers have introduced low-interest financial incentives, sales have declined month-over-month due to the impact of holidays. Specifically, BYD's new energy passenger vehicle sales in February were 187,782 units, down 8.6% month-over-month and 41% year-over-year. The weakening of downstream battery production and the wait-and-see attitude of procurement have directly raised concerns about the demand for lithium carbonate, putting pressure on lithium prices.

3. January lithium carbonate shipments from Chile concentrate at ports, creating short-term downward pressure.

In January, Chile exported 16,950 tons of lithium carbonate to China (a month-on-month increase of 44.82%). Additionally, 27,800 tons of lithium sulfate—equivalent to approximately 13,900 tons of LCE—will arrive at ports in early March, triggering market panic over inventory accumulation.

4. Zimbabwe’s export restrictions are not “one-size-fits-all,” and market panic is easing.

Zimbabwe has suspended lithium ore exports mainly to crack down on illegal and non-compliant export activities. Mining companies holding valid mining licenses and approved processing plants can still be allowed to export minerals normally. In addition, Zimbabwe is currently holding a meeting to discuss how to address their concerns, including the value-added extension of downstream industries. The Chinese embassy has visited the Minister of Mines for discussions, and it is expected that this meeting will resolve the issues relatively smoothly. The market's high sentiment due to concerns about tight supply has been digested.

Lithium carbonate data analysts believe that the lithium price frenzy in 2022 was a product of "mismatched supply and demand + geopolitical sentiment + an immature market" during a specific historical period. In 2026, short-term disruptions such as geopolitical conflicts will only cause temporary fluctuations and will not change the long-term development trend of the industry. The global trend toward new energy transformation remains unchanged, and the continuous growth in demand for new energy vehicles and energy storage will support a steady increase in lithium carbonate demand. Specific attention still needs to be paid to changes in market demand.