Jiangxi lepidolite mining and processing infrastructure in China.
By Salini Krishnan
The lithium market’s 2026 surplus is becoming increasingly dependent on one question: when, and at what rate, CATL can restart its Jianxiawo lepidolite mine in Jiangxi, China.
The mine remains closed pending environmental approval after its mining licence expired. That has placed approximately 4% of global lithium supply in question and turned a projected surplus of about 78,000 tonnes of lithium carbonate equivalent (LCE) into a potentially fragile balance. If Jianxiawo remains offline and other Jiangxi operations face delays, the market could move into deficit.
That risk is now reflected in revised price forecasts from BMI, a Fitch Solutions company. BMI expects mainland China lithium carbonate prices to average about US$20,100 per tonne in 2026, with lithium hydroxide monohydrate at US$19,600/t and 6% spodumene concentrate at approximately US$2,000/t FOB Australia.
Those forecasts do not assume a full-blown shortage. They point instead to a market where energy-storage demand, EV battery chemistry and constrained raw-material supply are narrowing the margin between surplus and deficit.
CATL’s mine is a market-balance milestone
Jianxiawo is among the largest lepidolite lithium operations in Jiangxi, a major Chinese production centre. The mine suspended operations after its permit expired and has remained closed while CATL works through safety and environmental procedures.
A safety production permit was reportedly secured earlier in the year, but that did not immediately allow commercial mining to resume. The remaining environmental approval is the critical milestone. A draft environmental impact assessment has entered the public-comment process, but approval, mine restart, ore processing and chemical conversion are separate steps.
The distinction matters because a permit does not instantly restore lost supply. Operators still need to restart extraction, move ore through crushing and processing circuits, secure feedstock for converters and rebuild normal output rates.
At full capacity, Jianxiawo has been estimated to represent roughly 4% of global lithium supply. Benchmark Mineral Intelligence has also estimated that around 60,000 tonnes of LCE could be at risk in 2026 if the shutdown continues.
That volume is large relative to the projected surplus. Benchmark’s earlier market balance showed a surplus of about 78,000 tonnes LCE for 2026. The loss of Jianxiawo output would not automatically erase that entire surplus because other mines and projects may increase production. However, when combined with slower ramp-ups, regional permitting issues and operational disruptions elsewhere, it could push the market into deficit.
Reuters reported that the mine remained closed pending environmental approval. Benchmark’s analysis has separately highlighted how the timing and pace of any restart could affect Jiangxi’s near-term balance.
Crushed lithium-bearing ore moving through industrial processing equipment.
Why the surplus estimates differ
The lithium market does not have one universally accepted supply-demand balance. Estimates differ according to the treatment of inventories, conversion losses, project ramp-up assumptions and the distinction between raw materials and finished chemicals.
S&P Global expects a broader 2026 lithium chemicals surplus of roughly 109,000 tonnes LCE, with supply growth continuing but demand increasing rapidly. Benchmark’s narrower estimate of approximately 78,000 tonnes LCE leaves less room for disruptions.
Both forecasts can be directionally correct while measuring different parts of the market.
China may have sufficient nominal chemical capacity, but converters still require reliable raw materials. A surplus of lithium chemicals on paper does not guarantee that every converter can secure the right feedstock at an economic cost. This is why spodumene imports, lepidolite availability and converter operating rates are becoming as important as global nameplate capacity.
The distinction is particularly important for lepidolite. Jiangxi producers have historically supplied Chinese converters, but the ore is relatively low grade and can carry higher processing and environmental costs. If regional permitting tightens, converters may seek more spodumene from Australia, South America and Africa.
That substitution is possible, but it depends on shipping schedules, available concentrate, conversion economics and the ability of Chinese plants to adjust their feed mix.
Supply-demand framework for 2026
The following framework separates the market effects of a normal restart from more disruptive outcomes. It is a scenario tool rather than a production forecast.
| Scenario | Jianxiawo assumption | Indicative 2026 supply impact | Likely market balance | Price implication |
|---|---|---|---|---|
| Restart case | Environmental approval is secured and production resumes late in the year, followed by a gradual ramp-up | A portion of the estimated 60,000 t LCE risk is restored | Modest surplus remains possible | Prices track the BMI base range, with volatility around restart news |
| Extended shutdown case | The mine remains offline through most or all of 2026 | Up to roughly 60,000 t LCE remains unavailable | The projected 78,000 t surplus narrows sharply and could become a deficit if other supply falls short | Carbonate moves above the base case and import competition increases |
| Broader Jiangxi disruption | Jianxiawo remains closed and other lepidolite mines face licensing or environmental interruptions | Losses exceed the CATL mine’s direct impact | A short-term deficit becomes more credible | Bull-case prices become possible, particularly if inventories decline |
| Supply offset case | Australian, South American and African projects ramp as planned and imports rise | Lost Jiangxi output is partly replaced | Surplus persists despite the shutdown | Prices remain capped, especially if EV demand moderates |
The most important variable in the table is not simply whether Jianxiawo restarts. It is the amount of commercial output delivered before the market reaches the end of the year.
Energy storage is creating a demand floor
The demand side of the lithium market is no longer defined only by passenger EV sales.
S&P Global expects lithium consumption linked to energy storage to grow by approximately 55% in 2026, with storage accounting for about 31% of total lithium demand in its outlook. That gives the market a new demand floor even if EV growth becomes more mature.
Grid-scale storage, commercial battery systems and data-centre backup installations are expanding as power systems absorb more intermittent renewable generation. The energy-storage market is also closely linked to the broader electricity-demand growth associated with artificial intelligence infrastructure.
This demand is relevant to lithium pricing because most stationary-storage systems use lithium iron phosphate, or LFP, chemistry. BMI notes that LFP accounts for more than half of EV batteries and more than 90% of energy-storage applications. LFP relies primarily on lithium carbonate rather than lithium hydroxide, helping explain why carbonate may retain a premium over hydroxide.
The EV market remains important, but its growth rate is moderating. BMI expects global passenger EV sales, including battery-electric and plug-in hybrid vehicles, to rise by about 3.9%, compared with much stronger growth in previous years. In China, however, new-energy vehicle sales remain substantial, with penetration reaching an estimated 58.5% of new-vehicle sales in June.
The result is a more complicated demand picture: slower percentage growth in passenger EVs, but continued absolute volume and a rapidly expanding storage segment.
Grid-scale battery storage is becoming a larger source of lithium demand.
Lithium price forecast 2026: base, bull and bear cases
BMI’s reference forecasts place mainland Chinese lithium carbonate at US$20,100/t and lithium hydroxide monohydrate at US$19,600/t. Its spodumene forecast of about US$2,000/t FOB Australia reflects tighter competition for hard-rock feedstock as Chinese converters seek alternatives to domestic lepidolite.
The scenarios below focus on battery-grade lithium carbonate and are intended to show the range of outcomes rather than provide a trading signal.
| Scenario | Lithium carbonate range | Main assumptions |
|---|---|---|
| Bear case | US$15,000–18,000/t | Jianxiawo restarts smoothly, overseas projects ramp on schedule, Chinese inventories rebuild and EV demand remains subdued |
| Base case | US$18,000–22,000/t | BMI-level pricing, strong storage demand, moderate EV growth and continued uncertainty around Jiangxi supply |
| Bull case | US$25,000–30,000/t | Extended CATL shutdown, broader Jiangxi disruption, falling Chinese inventories, delayed overseas supply and stronger-than-expected storage procurement |
The bear case would require more than a CATL restart. It would likely also involve a reliable increase in imports and a sustained recovery in Australian, South American and African supply.
The bull case would require the opposite: a prolonged environmental approval process, weaker-than-expected mine output, tightening converter inventories and stronger procurement from storage developers. Higher prices could then encourage idle capacity to return, but restart economics and permitting timelines would limit how quickly new supply could respond.
What operators and investors should monitor
The next lithium market signals will be operational and regulatory rather than purely financial.
Key indicators include:
- Environmental approval: Whether Jianxiawo clears the remaining EIA process.
- Actual output: Ore extraction, crushing, conversion rates and monthly LCE production after any restart.
- Chinese inventories: Stocks held by converters, cathode producers and battery manufacturers.
- Converter rates: Whether Chinese plants reduce operating rates because of feedstock shortages or increase output to capture higher margins.
- Storage procurement: Grid-scale battery orders, utility tenders and data-centre backup demand.
- EV sales and battery mix: Chinese NEV sales, global EV growth and the relative share of LFP and nickel-rich chemistries.
- Spodumene imports: Shipments from Australia, South America and Africa, including the timing and grade of concentrate arrivals.
- Overseas project execution: Ramp-ups, maintenance, weather disruptions and permitting at new Australian, South American and African operations.
Export logistics will determine how quickly imported spodumene can offset Chinese supply losses.
The market is closer to a deficit than the headline surplus suggests
The Jianxiawo shutdown has not conclusively created a global lithium deficit. S&P Global still sees a chemical surplus, and new production from Australia, Argentina, Zimbabwe and other regions could add supply during the year.
But the shutdown has reduced the market’s margin for error. A projected surplus of 78,000 tonnes LCE can disappear quickly if CATL’s mine remains offline, other Jiangxi producers are disrupted and energy-storage demand continues to expand at the rates forecast by S&P Global.
That is the central issue for the lithium price forecast 2026. The market does not need a broad collapse in supply to become tight. It only needs a few major supply assumptions to fail at the same time that storage demand, LFP adoption and Chinese battery production remain firm.
For operators, the episode reinforces the value of low-cost, permitted and diversified feedstock. For converters and battery manufacturers, it highlights the importance of inventory visibility and import flexibility. For policymakers, it shows how environmental approvals in one Chinese province can affect global critical-mineral pricing.
Until Jianxiawo is producing at a verified commercial rate, the 2026 lithium market should be treated as a narrow-surplus market with meaningful deficit risk: not as a comfortably oversupplied one.
Sources: BMI analysis reported by Mining Weekly, S&P Global, Reuters and Benchmark Mineral Intelligence. Related analysis: Lithium supply: CATL mine shutdown risks market deficit and Lithium price forecast 2026: drivers, risks, base and bull case.