Lithium slumps 5.7% in a day on China–EU hybrid deal

What happened

On 12 October, SMM quoted spot battery-grade lithium carbonate at 111,500–119,300 yuan per tonne, an average of 115,400 yuan. That is down 6,950 yuan, or about 5.7%, from the previous working day.

Futures fell harder. SMM said the most-traded contract (2701) hit an intraday low of 105,320 yuan, down almost 11% at one point, while open interest rose by about 17,000 lots to 440,000. Mining.com.au, citing Reuters, reported the Guangzhou contract ended daytime trade down 11.8% at 104,740 yuan, its weakest since December 2025 and roughly half its May peak.

The trigger was a China–EU deal, announced by EU Trade Commissioner Maroš Šefčovič, that could more than halve Chinese hybrid-car exports to the bloc. SMM said the restricted models are mainly LFP hybrids.

Our take

This is a demand-expectations sell-off, not a supply glut today. SMM itself notes that demand data is not weak, inventories keep falling and spot ore is tight. Traders have simply moved on to 2027, where restarts and new mines look plentiful.

Rising open interest on falling prices means new short positions, not just longs leaving. That usually keeps pressure on for a while. For lithium miners, the near-term read is weaker realised prices; for buyers, it is a better window to lock in supply.

Why it matters for AI infrastructure

Data centers increasingly rely on lithium batteries for backup power and on-site storage, and LFP is the chemistry of choice for grid-scale systems. Cheaper lithium lowers the cost of pairing AI campuses with batteries.

The risk is the other side of the cycle. Low prices discourage new refining outside China, which keeps the processing gap wide when demand comes back.