Explosive earnings, yet plunging stock prices! Why are lithium-mining stocks collectively suffering a 'sell-off upon good news'?

The 530,000-ton supply increase in 2027 amounts to one-quarter of the entire 2026 annual supply! Major sources of this incremental supply include the following: Australia: CGP Phase III ramp-up at Greenbushes, Wodgina expansion, and Pilgan output growth—contributing approximately 150,000–200,000 tons; Africa: Goulamina Phase II in Mali, Bikita expansion in Zimbabwe, and Manono in the Democratic Republic of Congo—contributing roughly 100,000–150,000 tons; South America: Cauchari-Olaroz Phase II in Argentina, Mariana expansion, and SQM output growth in Chile—contributing about 100,000–120,000 tons; China: Full-scale production at Jianxiawo in Jiangxi Province; expanded output from Qinghai salt-lake projects (Salt Lake Potash’s total lithium carbonate capacity has reached 98,000 tons/year); and commissioning of the Cuola mine in Sichuan—contributing approximately 80,000–100,000 tons. Of course, demand for lithium carbonate is also growing. Energy storage battery demand is up 40%–50% year-on-year, while power battery demand continues to grow in double digits. However, demand growth (~14%) has fallen far short of supply growth (24%). In an August 2026 research report, China Securities Construction Investment predicted that "demand will remain robust through 2027, with lithium carbonate continuing to face structural supply shortages." Yet this optimistic outlook hinges on the assumption that "uncertainties surrounding overseas mining policies may constrain actual supply below expectations." In other words, even bullish institutions base their forecasts on the premise of supply shortfalls. Conversely, the alternative hypothesis—that surging demand alone could absorb this 530,000-ton supply surge—is clearly untenable. Tianqi Lithium’s profit elasticity is highly sensitive to lithium carbonate prices. According to institutional estimates, every RMB 10,000/ton decline in lithium prices reduces Tianqi’s quarterly net profit by approximately RMB 400–600 million. If the 2027 average lithium price falls from RMB 180,000/ton to RMB 120,000/ton, Tianqi’s annualized profit could shrink from the RMB 8-billion level to below RMB 4 billion. The market’s current valuation reflects investors’ expectations for Tianqi’s 2027 earnings—not its already-reported 2026 interim profits, which have long been priced into the stock. 03 Geopolitical Risks Facing China’s Lithium Mining Sector Globally Capacity overhang represents a longer-term pressure, whereas increasingly complex geopolitical dynamics overseas pose an immediate threat. All three companies highlighted overseas operational risks as core risk factors in the risk disclosure sections of their semi-annual reports. Tianqi Lithium even devoted two full pages to detailing its recent litigation defeat in Chile—a likely heaviest blow ever suffered by a Chinese lithium mining firm in its overseas investments. Tianqi Lithium: Loss of Control Over SQM in Chile, Final Court Ruling Against Tianqi In the 'Geopolitical Factors and Risks of De-globalization' section of its semi-annual report, Tianqi Lithium disclosed that on May 31, 2024, its equity investee SQM signed a 'Partnership Agreement' with Chile’s state-owned copper company Codelco. Under the agreement, SQM’s lithium mining and operating rights at the Atacama Salt Flat—originally set to expire in 2030—are extended to 2060; and its authorized lithium production quota at Atacama between 2025 and 2030 is scheduled for an increase. However, effective upon the agreement’s entry into force, Codelco will hold majority equity in the joint venture overseeing Atacama’s core lithium operations—and will consolidate the joint venture’s financial statements starting in 2031.

Plummeting over one month by one-quarter; the RMB 120,000/ton 'defensive line' for lithium prices breached!

According to Ju Cunquan, lithium analyst at Fubao Information, the current correction in lithium carbonate prices is no accidental short-term fluctuation but an inevitable outcome driven by multiple converging factors. The earlier valuation premium built on high seasonal-demand expectations is now being gradually 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 strong cell production volumes. The issue isn’t near-term demand—it’s concern 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 lithium spodumene imports continued expanding steadily. Domestic production remained equally active. With the conclusion of the summer seasonal maintenance period, major lithium chemical plants resumed operations throughout August. Fubao Information data shows that China’s total lithium carbonate output rose 1.67% month-on-month and 30.99% year-on-year 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 inventory-building season for the new-energy industrial chain—but this year’s performance fell markedly short of expectations. Fubao Information’s data for the first three weeks of September reveals a steady decline in weekly lithium carbonate inventory drawdowns—from 2,567 tons down to 1,377 tons—while apparent demand slid from 27,300 tons to 26,300 tons, showing a clear downward trend. Looking ahead, Li Pan, lithium industry analyst at Shanghai Steel Union, believes that in the short term, extreme downside selling pressure and concentrated liquidation by long positions are possible; once investor sentiment stabilizes, prices may rebound. Sustained inventory drawdowns before year-end will drive down the inventory-to-sales ratio, gradually establishing medium-term support and allowing prices to revert toward fundamentals-based valuations. Some observers outside China argue that the current nervousness and sharp stock price declines are somewhat overreactive. 'In my view, this drop stems more from investor sentiment than from underlying market conditions,' said Ignacio Mhech, CEO of Chilean mining firm CleanTech Lithium Plc. 'There’s no fundamental market basis supporting this move—and it should reverse in the short term, given analysts still forecast supply deficits over the coming years,' he added during an interview in Santiago. Everbright Futures notes that in mid-to-late September, although market inventories continued drawing down, spot market strength remained insufficient; meanwhile, persistently weak forward-looking expectations further accelerated the lithium price decline. Looking ahead to Q4, additional supply may arrive from Zimbabwe (gradually reaching port), Australian mines resuming operations, and domestic new mines ramping up production. On the demand side, while cathode material producers maintain positive output growth, battery manufacturers cut September output plans—and Q4 growth rates may likewise moderate. From Q4 through the first half of next year, attention should focus on two fronts: first, whether falling prices trigger maintenance shutdowns or output cuts at lithium chemical plants; second, whether lithium ore supply risks begin manifesting in the spot market.

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