Lithium Falls 25% in a Month as China Freezes New Battery Factory Approvals

Battery Tech 6 OCT 2026 1,770 words 9 min read By news.jualin.id Editorial Desk

Lithium Falls 25% in a Month as China Freezes New Battery Factory Approvals

Introduction

The lithium market delivered a number last month that looked impossible next to the electric vehicle headlines: battery-grade lithium carbonate futures on the Guangzhou Futures Exchange fell about 25% during September, sliding from above 160,000 yuan per tonne to below 120,000 yuan, or roughly $17,900, by the close of September 30. In the same month, European electric vehicle registrations set a record. That apparent contradiction is the story, and it is not a mystery. The price of lithium carbonate is set by how many cathode cells Chinese factories have scheduled to build, not by how many cars Europeans bought. When the two move in opposite directions, as they did last month, the price is telling you about inventory and overbuild, not about demand.

Beijing appears to have reached the same conclusion about the wider sector. Regulators have suspended approval of new power and energy-storage battery projects that have not yet broken ground, pending a year-end review of industry capacity, according to a September report by Cailian Press — a decision that follows months of storage announcements documented here on our battery tech desk. The reporting is corroborated across outlets including Caixin Global, which frames the freeze as an effort to rein in overcapacity, noting that planned new capacity this year has already climbed to roughly 1.5 times China's total battery output in 2025.

Put the price collapse and the factory freeze together and a coherent picture emerges. This is a sector-wide correction, and the organisations responding fastest are the ones that have spent years building the one supply source that does not depend on a new mine or a new gigafactory: recycled material.

The Price Signal Points at Supply, Not Demand

The demand data for the period is genuinely strong. European EV sales reached 1.64 million units between January and August 2026, up 45% year on year, with EVs taking 22% of the market. Battery-electric vehicles alone accounted for 21.7% of new car registrations, up from 15.8% a year earlier. Against that backdrop, a 25% monthly collapse in the lithium price is not a demand story.

Adam Megginson, principal analyst at Benchmark Mineral Intelligence, attributed the September slide to weaker quarter-end sentiment pulling lithium chemical and spodumene prices down together, rather than to any change in installed electric vehicle demand. Spodumene, the hard-rock concentrate that most lithium carbonate is refined from, fell 23.5% over the third quarter. Lithium carbonate was assessed at $19,750 per tonne CIF Asia while Chinese ex-works prices dropped 20.8% over the same quarter, leaving seaborne contract pricing above domestic levels.

The metals around lithium followed. On October 1, LME nickel traded near its 2026 low at $16,000 to $16,700 per tonne, and cobalt fell below $40,000 despite the Democratic Republic of the Congo's 96,600-tonne export quota.

Chemistry explains why lithium alone kept falling while other metals did not recover. Lithium iron phosphate cells contain no nickel and no cobalt, and accounted for more than 55% of global EV battery deployment in 2025, up from nearly 50% in 2024. In China, LFP reached 81.3% of power cell output. Every additional EV built with an LFP pack therefore adds lithium demand without adding a gram of nickel or cobalt demand. That asymmetry concentrates the pressure on a single commodity.

The result is a brutal arithmetic for upstream developers. Weak spodumene prices defer construction, pushing planned 2029 and 2030 supply further out and favouring permitted projects that stay funded through the downturn. The widely watched threshold is 160,000 yuan per tonne: a return above it improves spodumene project economics, while prices below it can push pre-production construction decisions into 2027.

What China Actually Froze

The scale of the build-out regulators are trying to contain is large enough to explain the price move on its own. Tian Qingjun, senior vice president of Envision Group, said storage cell expansion announced this year alone exceeds 800 GWh, that roughly 1.2 to 1.5 TWh of annual capacity will be commissioned by the end of 2026, and that total planned capacity now exceeds 2 TWh. Envision is itself a cell producer, so those figures are a company estimate rather than an official tally.

Independent data points the same way. China commissioned 21.81 GW / 58.60 GWh of new-type energy storage in the first half of 2026, down 18% in power and 16% in energy year on year, even as cumulative installed capacity reached 168.3 GW / 448.7 GWh, up 59% and 71%, according to CNESA DataLink figures released by the China Energy Storage Alliance. CNESA data put commissioned storage cell manufacturing capacity at 809.5 GWh as of the end of June, excluding lines that switch between EV and storage cells.

Two details matter for anyone watching what happens next. First, the freeze targets projects still at the planning stage, so operating plants and exports are unaffected, which makes it a calibrated tightening rather than a shock. Second, the domestic price pressure is being actively managed on the tax side: Beijing restored a 2% consumption tax on lithium-ion cells, packs and clusters on September 1, 2026, rising to 4% in September 2027, while the VAT export rebate was cut from 9% to 6% in April 2026 and is due to reach zero on January 1, 2027. Directly exported batteries remain exempt. Chinese suppliers still signed 298 GWh of overseas storage orders in the first half of 2026, up 83% year on year.

Recycling Becomes the Cheapest New Supply

The structural answer to an overbuilt cell industry is the same answer that applies to any commodity at the bottom of its cycle: use less of the expensive thing. Battery packs remain the largest single cost line in an electric vehicle, typically 30% to 40% of total cost, which is why recovered material has obvious economic value once the cathode chemistry is right.

General Motors completed a closed-loop pilot that turns that logic into a manufacturing process. Working with Cirba Solutions, GM recovered 80 end-of-life EV batteries, had them disassembled and processed at Cirba's Ohio facility into black mass, and then had that black mass further refined into more than 12 metric tons of new cathode active material made with 100% recycled nickel, cobalt and manganese. Ultium Cells, the joint venture involving GM and LG Energy Solution, produced cells from that material, and GM assembled modules and packs at Factory Zero in Michigan and Spring Hill in Tennessee. The first vehicles carrying those cells, including the Cadillac Lyriq and Chevrolet Silverado EV Trail Boss, have rolled off the line.

The claim worth testing is not that recycling works but that it works to automotive specification. GM states that processes such as Cirba's can recover up to 95% of nickel, cobalt and manganese and up to 80% of lithium from used batteries. Melissa Flaherty, GM's director of sustainable EV battery ecosystem, framed raw materials as among the largest cost drivers in battery cells and said recovery can support lower-cost batteries while reducing reliance on newly extracted material.

Scale is still the constraint, and the numbers are honest about it. The International Energy Agency estimates nearly 14 million EV batteries will reach end of life worldwide by 2040. S&P Global Mobility estimates recycled batteries could supply roughly 36% of global cobalt demand and 31% and 22% of nickel and lithium demand respectively by 2037. Michigan's own experience illustrates both the opportunity and the friction: Great Lakes Recycling, a 90-year-old ferrous recycler that moved into a 60,000-square-foot facility in September 2025, processes 100 to 150 battery packs per day and dismantles a standard pack in four to six minutes, while ReCharge Recycling reports that 90% to 95% of the batteries it receives still retain usable capacity.

Policy Is Now Part of the Supply Equation

The most concrete recent signal that recycled material is becoming tradeable at scale came on October 1, when American Battery Technology Company disclosed approval from the U.S. Department of Commerce's Bureau of Industry and Security for the sale of up to $100 million of its recycled black mass under a Defense Priorities and Allocation System licence. The licence follows new federal export controls on critical battery materials, and it is notable as a case where policy opened a market rather than closed one. ABTC's first commercial-scale facility near Reno has processed end-of-life batteries and manufacturing scrap since 2023, and the company reported over 400% year-over-year revenue growth, with a second recycling facility backed by $150 million in competitive Department of Energy grants.

Automakers are also building dedicated recovery capacity rather than relying on third parties. Toyota opened its Toyota Battery Center of North America, a 30,000-square-foot Michigan facility, as its hub for battery sourcing, applications and recycling. Porsche is working with German recycler cylib on a programme with production slated for 2028. GM is deploying roughly 10,000 second-life batteries with Redwood Materials, including what it describes as the largest second-life battery microgrid in North America.

Conclusion

The September lithium price collapse is best read as a verdict on capacity, not on the electric vehicle transition. European registrations rose 45% over eight months while Guangzhou lithium futures fell 25% in a single month, and the explanation is a Chinese cell build-out large enough that regulators have now paused it. That correction will eventually work through to supply: deferred spodumene projects push new tonnes into 2029 and beyond.

The organisations positioned for the aftermath are the ones selling a process rather than a mine. GM has shown that recycled cathode material can meet automotive qualification standards; ABTC has secured a licence to export $100 million of black mass; Michigan's recyclers are handling 100-plus packs a day and finding most of them still have capacity left. The industry that spent fifteen years competing to build more cell capacity is now being asked to prove it can recover material from the ones already built, and for the first time the cheapest lithium in the market is lithium that was never mined at all.

Lithium Falls 25% in a Month as China Freezes New Battery Factory Approvals

Lithium Falls 25% in a Month as China Freezes New Battery Factory Approvals

Introduction

The Price Signal Points at Supply, Not Demand

What China Actually Froze

Recycling Becomes the Cheapest New Supply

Policy Is Now Part of the Supply Equation

Conclusion

Images

References