After eight consecutive days of gains, lithium carbonate futures prices hit the brakes. On October 31, the LC2601 contract, the most actively traded, closed at 80,780 yuan per ton, down 3.42%.
Chuangyuan Futures analyst Yu Shuo attributed the sharp pullback to supply-side news. "The recent rally was driven by strong demand from energy storage batteries, inventory drawdowns, and slower-than-expected resumption of CATL's Xianxiawo project," Yu explained. However, as prices rose, downstream buyers became reluctant to restock at higher levels, weakening spot market activity. Meanwhile, limited warehouse receipt reductions and rumors of CATL accelerating its Xianxiawo project's restart dented bullish sentiment.
Market sources indicated that CATL's Xianxiawo project might resume operations earlier than expected, though no concrete progress has been confirmed. On October 31, open interest in the LC2601 contract fell by 22,400 lots. However, from October 16 to 30, open interest had surged by 343,000 lots to 555,000, with prices climbing over 16% from 72,940 yuan to a peak of 84,940 yuan.
Galaxy Futures analyst Chen Jing noted that while this rally saw higher open interest growth than the 30%+ surges in July and August, the price increase was smaller, reflecting growing market divergence above 80,000 yuan. Industrial hedging increased at these levels while downstream purchasing slowed, suggesting speculative funds may be fueling the rally. Concerns about potential supply pressure from CATL's project resumption further weighed on prices.
CITIC Futures analyst Wang Meidan pointed out that slowing warehouse receipt reductions also weakened price support. Since early October, warehouse receipts dropped 34.8% to 27,621 lots, but the weekly decline of 1,078 lots last week marked a significant slowdown from previous weeks' 2,000+ lot reductions.
Fundamentally, the market remains tight. SMM data shows weekly lithium carbonate output fell slightly to 21,000 tons (down 228 tons) as of October 30, mainly due to reduced spodumene supply. Demand remains robust, with China's October battery production (power/energy storage/consumer) up 22.4% month-on-month to 186GWh. Inventories have declined for 11 straight weeks, dropping another 3,000+ tons to 127,000 tons, with smelters and downstream users leading the drawdown.
Analysts suggest short-term trading will focus on CATL's restart timeline. Yu Shuo noted monthly inventory reductions of 8,000–10,000 tons could be offset by Xianxiawo's 10,000-ton monthly capacity. A delayed restart may support prices, while early resumption could extend the correction. GF Futures analyst Lin Jiani expects prices to consolidate within a wide range, with limited downside due to strong demand expectations.
Chen Jing added that even if CATL resumes production, output delays and tight November supply could cushion prices. However, the LC2601 contract may weaken if supply rebounds ahead of an expected January demand slowdown.
Market participants warn investors to verify rumors amid heightened speculation about CATL's project. Recently, two traders were fined 261,800 yuan for spreading false lithium carbonate information and conflicted trading.