The US Department of Defense has scrapped a tender to purchase lithium for its strategic reserves, underscoring the ongoing difficulties in bolstering the nation's supply of critical minerals. According to an announcement from the Defense Logistics Agency (DLA) on Monday, the agency withdrew its plan to procure nearly 36 million pounds (approximately 16,000 tonnes) of battery-grade lithium carbonate, a contract valued at up to $300 million. The DLA did not provide a reason for the cancellation.

Originally issued on July 2, 2026, the procurement was designed to add lithium to the US National Defense Stockpile through five-year, fixed-price contracts, aiming to mitigate supply risks for critical minerals. Bids were initially due on July 17, with the deadline extended twice thereafter. Critical minerals have become a political priority for the US as it seeks to significantly reduce its heavy reliance on China as the primary supplier.

Reports indicate that the Trump administration announced in February of this year the launch of a $12 billion critical minerals stockpile initiative. The program aims to establish strategic reserves of lithium, nickel, and rare earths to safeguard the supply chains for the renewable energy, semiconductor, and defense industries. Over a dozen companies, including General Motors and Boeing, have already signed on to participate.

So far this year, the price of lithium carbonate used in electric vehicles and energy storage systems has surged nearly 20% in China, while price volatility remains extreme. On Tuesday, the main lithium carbonate futures contract hit a high of 141,300 yuan. China Securities Co., Ltd. forecasts that as demand peaks in the second half of the year, the supply deficit for lithium carbonate is expected to widen gradually. Last year, the DLA, which manages the Defense National Stockpile, also cancelled a tender for cobalt, a metal used in batteries and the aerospace industry.

In pre-market trading on Tuesday in the US, the lithium mining sector saw a rally. Sigma Lithium Corporation (SGML.US) rose over 4%, Lithium Americas Corp. (LAC.US) gained more than 2%, Albemarle Corporation (ALB.US) climbed nearly 2%, and Sociedad Quimica y Minera de Chile S.A. (SQM.US) advanced almost 1%.