Chinese lithium futures slumped nearly 12% on Monday after the European Union and China struck a deal limiting hybrid vehicle imports into the bloc, a move that dented demand expectations for the battery metal just as the market had been pricing in steady growth from electrified vehicle exports.
The most actively traded lithium carbonate contract on the Guangzhou Futures Exchange fell to its weakest level since mid-December 2025, before settling down 11.8% to 104,740 yuan per ton, or roughly $15,649, its steepest one-day decline since March. Shares of major producers also slid, with Tianqi Lithium down 5.1% and Ganfeng Lithium down 3.9%.
Under the new arrangement, the EU will cap Chinese hybrid vehicle imports at 350,000 units in the first year, with the quota rising 6% annually thereafter, a limit that could cut China’s hybrid exports to the bloc by more than half from recent levels.
Hybrids carry far smaller battery packs than full electric vehicles, so a slowdown in EU-bound hybrid shipments translates quickly into reduced lithium demand per vehicle, even if overall Chinese auto exports to Europe hold up. That dynamic left traders recalibrating demand forecasts that had assumed continued growth in China's electrified exports.
The selloff adds to a volatile year for lithium prices, which have swung with shifting EV subsidy policies, trade negotiations and battery demand forecasts across major markets, and underscores how exposed the battery supply chain remains to trade policy decisions made far from the mines and refineries that produce the metal.
