Lithium spot prices have seen significant volatility in early 2026, with Scotiabank analysts calling the recent rise disconnected from underlying market fundamentals.
China’s domestic lithium carbonate prices have increased 34% since the start of the year, while spodumene prices have increased 46%. This rapid increase saw lithium carbonate rise from around $18,000 per metric ton to $23,000 per metric ton in a single week. Futures markets reacted similarly, trading at even higher premiums.
Scotiabank’s analysis suggests that this recovery is not currently driven by end-user demand for electric vehicles, but rather by regulatory changes in China. Specifically, Beijing’s decision to reduce export value-added tax reductions appears to have triggered a wave of early export demand as buyers try to preempt this policy decision.
Analysts warn that because this price development is largely a reaction to policy rather than a structural change in consumption, there is a significant risk of price retracement once immediate export activity ends. They note that although stock markets priced lithium at $17,000 to $18,000 per ton, the spot price quickly rose above those levels.
“Once this exercise is complete, watch for retracement risk – both in commodities and a little less so in stocks,” writes Scotia.
We’re seeing some of that today with lithium prices falling and stocks falling noticeably, with Albernale down 6%.
ALB action
Scotiabank suggested a defensive rotation for investors looking to manage risk. While maintaining a positive long-term outlook on the sector, they recommend pivoting exposure from Albemarle to Sociedad Quimica y Minera de Chile (SQM). The justification is based on the relative sensitivity to raw material prices; SQM is estimated to have approximately half the leverage to spot lithium price movements compared to Albemarle, potentially providing greater resilience if spot prices correct as expected.
It’s worth noting that in September, during another lithium stock squeeze based on a potential Trump investment in a lithium stock, the same analysts warned that LAC prices had gone way too far. They ultimately fell by 50% in the following three weeks.
