Signal: Cell Prices Softened. System Prices Didn't.
H1 actuals from SMM and InfoLink confirm what the weekly data has been signaling: Chinese ESS cell spot is still softening, but the moves are getting smaller, and DC-side system pricing at RMB 0.50/Wh hasn't budged. The cell-to-system spread is widening. Lithium carbonate is oscillating without direction, removing the tailwind that fed cell deflation through 2025. If your model assumes system-level costs track cell-level costs with a lag, H1 says the lag is lengthening or the pass-through ratio is compressing. Both produce the same outcome for your next sourcing call.
Signal: Cell Prices Softened. System Prices Didn't.
H1 actuals from SMM and InfoLink confirm what the weekly data has been signaling: Chinese ESS cell spot is still softening, but the moves are getting smaller, and DC-side system pricing at RMB 0.50/Wh hasn't budged. The cell-to-system spread is widening. Lithium carbonate is oscillating without direction, removing the tailwind that fed cell deflation through 2025. If your model assumes system-level costs track cell-level costs with a lag, H1 says the lag is lengthening or the pass-through ratio is compressing. Both produce the same outcome for your next sourcing call.
Q4 Risk Flag
SMM's H1 ESS cell review, published today, uses unusually direct forward-looking language: Q4 "will inevitably give rise to an extremely strong export rush" ahead of the full VAT export rebate cancellation on January 1, 2027, with cell prices "very likely to hit their annual peak." This is SMM's projection from its industry survey base. No public customs or freight data confirms pull-forward activity has begun.
The incentive structure, however, is confirmed policy. The January 1 cliff eliminates the remaining 6% transitional rebate, twice the 3pp step that took effect April 1. At current ESS cell pricing, full elimination represents roughly $4.4/kWh of cost pressure on exporters. Rational front-loading follows.
The supply chain has no buffer to absorb it. SMM reports 0.36 months of industry inventory coverage, first- and second-tier backlogs extending beyond Q3, spot cargo "extremely hard to secure," and Q3 lithium cost pass-through still working into cell quotes. A Q4 export rush would layer additional demand pull onto a supply chain already capacity-constrained on the 314 Ah cells that constitute mainstream delivery spec.
Anyone floating H2 ESS cell pricing into Q4 is betting that annual surplus arrives before four additive pressures converge on the same quarter. SMM's assessment, conditional as it is, suggests the timing runs the other way.
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