Profits surge 20-fold, yet stock prices plummet 40%: Why have lithium mining stocks suddenly collapsed?

On July 8, Tianhua New Energy fell nearly 16%; Rongjie Shares, Yaha Group, Shengxin Lithium Energy, and Tianqi Lithium hit the daily trading limit down. On July 9, Tianhua New Energy plunged over 14%; Rongjie Shares again hit the limit down; Yaha Group fell nearly 9%; Shengxin Lithium Energy and Tianqi Lithium dropped more than 6%. On July 10, Tianhua New Energy fell nearly 5%; Rongjie Shares hit the limit down once more; Yaha Group slid over 7%; Shengxin Lithium Energy and Tianqi Lithium declined about 4%. Not only upstream players, but mid- and downstream firms also collectively weakened: Longpan Technology (cathode), Shanshan Co., Ltd. (anode), Tianqi Materials (electrolyte), Enjie Co., Ltd. (separator), Fangyuan Co., Ltd. (precursor), Dexin Technology (lithium battery equipment), and Eve Energy (lithium batteries) all suffered sharp share price declines. This precipitous stock plunge stands in stark contrast to soaring financial performance—lithium mining enterprises are performing an ‘Ode to Ice and Fire.’ So what exactly happened? 02 The Past Is Rising, the Future Is Falling Recently, markets were still immersed in narratives of rising lithium prices and a recovering lithium-ion battery sector: The main contract for lithium carbonate futures rebounded from a historic low of under ¥60,000/ton in May last year to a high of ¥200,000/ton in May this year—a roughly 2.5-fold increase. Latest data shows China’s lithium battery production capacity in July 2026 reached 283 GWh, up 5.6% month-on-month; global production stood at 296 GWh, up 5.3% MoM. From March to July, lithium battery output has consecutively set new historical highs for five months. Goldman Sachs, having previously held a bearish view on lithium prices, reversed its stance in June, issuing a report stating that the logic behind this round of lithium price rebound closely mirrors that of 2020–2021: 2025 marks the tail end of the lithium price downtrend, while demand recovery in 2026 will drive supply-demand rebalancing and price rebound. Yanhu Shares, Yaha Group, Chage Mining, Shengxin Lithium Energy, and Tianhua New Energy all cited rising lithium carbonate prices as a key driver of their earnings growth in their semi-annual reports. Who could have imagined that just as investors were celebrating the lithium battery sector’s high-temperature revival with dancing and singing, the market delivered a harsh blow: From July 6 to 10, the main contract for lithium carbonate futures fell by 2.5%, 0.73%, 3.01%, 5.39%, and 1.81%, respectively—cumulatively dropping over 11% in five days. Lithium mining stocks collectively ‘collapsed’: Tianhua New Energy, Shengxin Lithium Energy, and Tianqi Lithium fell over 40%, 23%, and 22%, respectively, over the same period. What caused this? Since lithium mining companies’ profits hinge on lithium carbonate prices, price volatility inevitably exerts direct impact on their stock valuations: During the upward phase of lithium carbonate prices, lithium mining firms realize earnings upside; when prices retreat from highs, their stock prices follow suit. In other words, earnings reflect the past, whereas stock prices reflect forward-looking expectations. Of course, from a market sentiment perspective, the decline in lithium mining stocks also stems from concentrated profit-taking in overheated themes, investment institutions’ ‘mid-year portfolio rebalancing,’ panic selling triggered by sector-wide weakness, and company-specific ‘red flags.’ 03 Supply Surges, Demand Under Pressure Why did lithium carbonate prices suddenly reverse course? In fact, the downward trend in lithium carbonate prices did not begin just recently—it has been underway since mid-May, following the earlier peak.

Plummeting over one-quarter within a month—the ‘defense line’ at ¥120,000 per ton for lithium prices has collapsed!

According to Ju Cunquan, lithium industry analyst at Fubao Information, this round of lithium carbonate price correction is no accidental short-term fluctuation, but rather an inevitable outcome driven by multiple converging factors. The valuation premium built upon earlier optimistic seasonal demand expectations is gradually being squeezed out, as the market undergoes a psychological shift—from ‘optimistic expectations’ to ‘reality check.’ Adam Megginson, Chief Lithium Price Analyst at Benchmark Mineral Intelligence Ltd., stated: ‘There is growing skepticism about whether consumption momentum can sustain through year-end to fully absorb the recent robust cell output. The issue isn’t current demand—but rather concerns over medium-term demand resilience.’ On the supply side, according to the latest customs statistics, China’s lithium carbonate imports surged significantly month-on-month in August, while total spodumene imports continued expanding. Domestic production remained equally active. With the conclusion of the summer seasonal maintenance period, major lithium salt producers resumed operations throughout August. Fubao Information data shows domestic lithium carbonate output rose 1.67% MoM and 30.99% YoY in August—with the spodumene-to-lithium processing route contributing the bulk of the incremental output. On the demand side, September is traditionally the peak season for inventory buildup across the new-energy industrial chain—but this year’s market performance has fallen markedly short of expectations. Fubao Information’s data for the first three weeks of this month shows weekly lithium carbonate inventory drawdown declining steadily—from 2,567 tons to 1,377 tons—while apparent demand slipped from 27,300 tons to 26,300 tons, exhibiting a clear downward trend. Looking ahead, Li Pan, lithium industry analyst at Shanghai Steel Union, believes short-term extreme downside pressure and concentrated liquidation by long-position holders remain possible; once investor sentiment stabilizes, prices may recover. Sustained inventory drawdown before year-end will lower the inventory-to-sales ratio, gradually establishing medium-term support—and prices may revert toward fundamentals-based valuation. Some observers outside China argue that this nervousness and the sharp stock price drop are somewhat overreactive. ‘In my view, this decline is driven more by investor sentiment than by underlying market conditions,’ said Ignacio Merec, CEO of Chilean mining firm CleanTech Lithium Plc. ‘There is no fundamental market basis supporting this move—and it should reverse in the near term, as analysts continue forecasting supply deficits over the coming years,’ he said in an interview in Santiago. Everbright Futures notes that in mid-to-late September, although market inventories continued drawing down, spot market strength remained insufficient—compounded by persistently weak forward-looking expectations, accelerating lithium price declines. Looking ahead to Q4, additional supply may emerge from Zimbabwean ore arrivals, Australian mine resumption, and ramp-ups at newly commissioned domestic mines. On the demand side, while cathode material output continues modest growth, battery cell production was lowered in September—and Q4 growth rates may also moderate. From Q4 through the first half of next year, attention should focus on two aspects: first, whether falling prices prompt lithium salt producers to initiate maintenance shutdowns or cut output; second, whether lithium mining supply risks will gradually manifest in the spot market.

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