Goldman Sachs has downgraded Ganfeng Lithium's H shares from "Neutral" to "Sell," citing downside risks in lithium spot prices due to weak short-term downstream market feedback and slower inventory restocking. The downgrade affects multiple Chinese lithium stocks, reflecting the investment bank's concerns over the medium-term supply-demand balance in the lithium market.
In its latest research report, Goldman Sachs analysts noted that while lithium market fundamentals have improved significantly and supply-demand tightness is expected to persist in the first half of next year, prolonged inventory cycles in energy storage systems could offset these gains. The bank revised its forecast for China's lithium carbonate benchmark spot price in the second half of 2025 to $9,500 per ton, 14% lower than its previous estimate.
This bearish outlook led Goldman Sachs to slash earnings projections. The bank reduced Ganfeng Lithium's 2026-2027 profit estimates by 36%-42% and expects the company to swing to a loss in 2025. Goldman Sachs also maintained its "Sell" ratings on Ganfeng Lithium's A shares and Tianqi Lithium's A and H shares. The bank set a target price of HK$32 for Ganfeng Lithium's H shares.
**Slowing Energy Storage Demand Adds Pressure**
A team led by Goldman Sachs analyst Trina Chen highlighted that energy storage systems previously drove much of the market's expectations and were a key pillar of lithium demand. However, as incremental demand growth slows, extended inventory cycles in energy storage may now weigh on prices.
The bank predicts a 12% lithium supply deficit relative to demand in the second half of 2025, but this will shift to a 10% surplus by the second half of 2026. This transition in supply-demand dynamics is expected to exert material downward pressure on lithium prices starting in late 2025.
**Current Valuations Reflect Overly Optimistic Price Assumptions**
Goldman Sachs noted that most Chinese lithium stocks currently price in a lithium price range of $16,200 to $24,500 per ton—significantly above its $9,500 forecast for late 2025. This disparity suggests valuation risks for these stocks.
Based on its revised lithium price outlook, Goldman Sachs adjusted Ganfeng Lithium's earnings trajectory from profitability to losses. This major revision underscores the margin erosion high-cost producers face amid falling lithium prices.
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