"Everyone is not playing the same game," Tianqi Lithium's CEO suggests standardizing the lithium carbonate pricing mechanism.

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“Unifying the rules of the game”—is that a sign of industry maturity?

“Carbonate lithium pricing mechanism: prices inverted, leading to a possible break in the supply chain of the lithium battery industry.” Recently, at the 2026 Battery Raw Materials Conference, Tianqi Lithium’s board director and president, Xia Juncheng, said.

As for the pricing of carbonate lithium, the rules currently used by upstream and downstream segments of the industrial chain are different. Between upstream mines and lithium salt plants, settlements often benchmark futures prices; but when downstream cathode material plants and battery companies sell externally, they still tie their pricing to spot quotation agency quotes.

When futures and spot prices differ only slightly, this pricing approach can keep the industrial chain running normally. However, when the spread (basis) between the two becomes too large, the mismatch of “upstream futures versus downstream spot” directly turns the intermediate processing stage into a severe area of profit compression.

Xia Juncheng worked out the numbers: when the mines sell ore to lithium salt plants at the futures average price, the lithium salt plants then sell to cathode material plants at the futures average price; but when cathode material plants sell to battery companies, they can only settle based on spot quotation agency prices. The price difference in the middle becomes the losses that the midstream segment has no choice but to bear.

When the price spread expands to the point that companies cannot absorb it, to reduce losses, at the end of last year, several leading cathode material enterprises jointly issued shutdown and maintenance notices. Hunan Yuna expects to reduce output of phosphate cathode material products by 15,000 to 35,000 tons; Wanrun New Energy plans to cut production by 5,000 to 20,000 tons. Defang Nano and Anada Technology followed suit.

Since around October last year, carbonate lithium futures (contract 2605) settlement prices surged in the short term. Over about four months, they rose from 73,000 yuan/ton to a peak close to 178,000 yuan/ton, while spot prices did not fully track the changes in futures prices. According to data from some institutions, in 2025 the spread between carbonate lithium futures and spot prices once reached as high as 17%.

China accounts for over 70% of the global lithium salt supply and consumption market, and cathode material production capacity accounts for more than 90%. It should have pricing dominance in the global lithium battery supply chain. But Xia Juncheng said that reality is that “everyone is not playing the same game.” Downstream cell manufacturers pursue stable agency quotes; while upstream lithium mining seeks higher premium through futures. Judging from the data, it is more common to see situations where futures prices carry a premium over spot quotation prices, and the intermediate segment may therefore have to pay the bill for spread risk. “This kind of mechanism for the chain is unhealthy.”

Although the futures-spot spread for carbonate lithium has already been gradually shrinking, the industry should still guard against risks like this.

In response, Xia Juncheng proposed that the industry should build a diversified pricing system and establish a unified pricing mechanism: introduce multi-dimensional quotation agencies, comprehensively consider futures prices and transaction conditions, break information barriers, and build a more broadly applicable market pricing benchmark.

At present, the industry is exploring more mature pricing mechanisms. To keep spot prices consistent with futures prices, starting this year Tianqi Lithium has adjusted the settlement prices for spot trades of all its products to one of the following two pricing methods: Shanghai Metals Market’s prices for high-quality battery-grade carbonate lithium and battery-grade lithium hydroxide (coarse particles); Guangzhou Futures Exchange’s price for the main contract of carbonate lithium.

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Responsible editor: Zhu Hunan