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Spot prices for lithium have experienced significant volatility to begin 2026, with Scotiabank analysts characterizing the recent surge as disconnected from underlying market fundamentals.Domestic Chinese lithium carbonate prices have risen 34% year-to-date, while spodumene prices have increased by 46%. The rapid rise has seen lithium carbonate move from approximately $18,000 per metric tonne to $23,000 per metric tonne in a single week. Futures markets have reacted similarly, trading at even higher premiums.Scotiabank’s analysis suggests this rally is not currently driven by end-user EV demand, but rather by regulatory changes in China. Specifically, Beijing’s decision to roll back value-added tax export rebates appears to have triggered a wave of front-loaded export demand as buyers attempt to preempt the policy move.The analysts warn that because this price action is largely reactional to policy rather than a structural shift in consumption, there is significant risk of price retracement once the immediate export activity concludes. They note that while equity markets had been pricing in lithium at $17,000 to $18,000 per tonne, the spot price has quickly outpaced these levels.”once this exercise is complete,
watch for retracement risk – both on the commodities and slightly less so on the equities,” Scotia writes.We are seeing some of that today with lithium prices lower and equities notably lower with Albernale down 6%.Scotiabank has suggested a defensive rotation for investors looking to manage risk. While maintaining a positive long-term outlook on the sector, they recommend rotating exposure from Albemarle into Sociedad Quimica y Minera de Chile (SQM). The rationale is based on relative sensitivity to commodity prices; SQM is estimated to have roughly half the leverage to spot lithium price movements compared to Albemarle, potentially offering better resilience should spot prices correct as anticipated.Note that back in September during another squeeze in lithium stocks based on a potential Trump investment in a lithium stock, the same analysts warned that prices of LAC had gone way too far. They ultimately fell 50% in the following three weeks.
This article was written by Adam Button at investinglive.com.
💡 DMK Insight
Lithium prices are soaring, but here’s why traders should be cautious: The 34% jump in domestic Chinese lithium carbonate prices and a staggering 46% rise in spodumene prices signal a market that’s reacting more to speculation than solid fundamentals. Scotiabank’s analysis suggests that this surge isn’t backed by a corresponding increase in demand or production capabilities, which raises red flags for sustainability. Traders need to consider that such disconnections often lead to sharp corrections. Watch for key technical levels; if lithium carbonate breaks above $20,000, it could attract more speculative buying, but a failure to hold that level might trigger a sell-off. Additionally, keep an eye on broader market indicators like EV sales and global supply chain developments, as these could provide insight into whether this price action is justified. The real story here is the potential for a pullback if fundamentals don’t catch up, so stay alert for any signs of a reversal in sentiment.
📮 Takeaway
Monitor lithium carbonate prices closely; a break above $20,000 could invite speculation, but a failure to sustain that level may lead to a sharp correction.
