The U.S. Department of Defense has canceled a tender to purchase up to $300 million worth of lithium carbonate for the national strategic stockpile, dealing another setback to the Administration's efforts to secure critical minerals for defense and other strategic industries.

DoD's Defense Logistics Agency (DLA), which manages the end-to-end defense supply chain from raw materials to end-user disposition, canceled the solicitation in its entirety effective August 3, 2026. The agency did not provide an explanation for the cancellation in its notice.

The DLA had published the tender in early July, seeking offers for nearly 36 million pounds — approximately 16,000 tons — of battery-grade lithium carbonate to be delivered over the next five years. The contract was expected to be worth up to $300 million.

The bid deadline had already been extended twice before the cancellation. It was first pushed from July 17 to July 30, and then from July 30 to August 5.

The failed tender marks the second such setback for the agency in recent years. Last year, the DLA also canceled a cobalt tender expected to be worth roughly $500 million, signaling broader difficulties in the U.S. government's attempts to procure critical minerals at fixed prices for multi-year supply agreements. China currently dominates global processing of both lithium and cobalt, and the U.S. has identified reducing that dependence as a national security priority, making the repeated procurement failures especially consequential for Washington's mineral stockpiling strategy.

On the market side, lithium carbonate prices have risen approximately 20% year to date. However, futures in China dipped in July to their lowest level in five months as several mines restarted operations, intensifying concerns about a potential supply glut in the coming months amid uncertain demand growth. The price volatility underscores the structural challenge facing government buyers: locking in fixed-price, multi-year contracts is difficult when spot markets swing sharply on supply and demand shifts that can unfold over weeks.

China's electric vehicle battery giant, Contemporary Amperex Technology Co. (CATL), was permitted in June to restart its Jianxiawo lithium mine — a move that pressured lithium prices lower in the Chinese market.

Lithium carbonate production in China is projected to increase by 7.6% in August compared to July, driven by improving feedstock arrivals from Africa and peak seasonal output from salt lakes, according to analysts at Mysteel.

The cancellation raises questions about whether the Pentagon will reissue the solicitation with revised terms, pursue alternative procurement mechanisms, or turn to direct investments in domestic production — an approach the department has already used to fund U.S.-based lithium and graphite projects under Defense Production Act authorities.

By Michael Kern for Oilprice.com