Global energy storage demand remains robust. The anticipated phase-out of China's new energy vehicle purchase tax exemption policy by 2026 may trigger year-end buying sprees, boosting domestic lithium battery production. This has cascaded to upstream cathode material suppliers, with leading manufacturers operating at full capacity and orders spilling over to second- and third-tier players.
The downstream industry's strong performance has intensified demand for lithium carbonate, creating a supply gap. Domestic lithium carbonate inventories have declined by nearly 10,000 metric tons in Q4, fueling sustained price increases. According to CITIC Securities, strong demand has led to monthly-level shortages and inventory drawdowns. Mysteel data shows November lithium carbonate supply at ~115,000 tons against demand of 128,000 tons, leaving a 13,000-ton deficit.
Off-season demand remains resilient, with order support extending into next year. The market dynamic has shifted from supply-driven pressure to consumption-led growth. Long-term projections indicate tightening supply-demand dynamics: 2026 global lithium supply is estimated at 2.089 million tons versus demand of 2.004 million tons, narrowing the surplus to 85,000 tons (excluding cathode inventory buffers). Structural shortages may emerge, transitioning price drivers from supply constraints to demand pull.
Zhongtai Securities notes that upward revisions in energy storage demand expectations have significantly improved lithium carbonate's 2026 supply-demand outlook, with potential equity market upside as the sector bottoms. Dadi Futures analysts project a balanced 2026 market (supply: 2.078 million tons; demand: 1.977 million tons), with prices having bottomed in 2025 and gradual upward trajectory expected, albeit with volatility.
Related Hong Kong-listed stocks: - GANFENGLITHIUM (01772) - TIANQI LITHIUM (09696) - CNGR (02579)
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