A research report from CITIC SEC suggests that despite recent price pressure, the tight supply-demand balance for lithium is unlikely to reverse in the near term, with prices expected to strengthen again in the latter half of 2026.
Key Points from the Report
In the first quarter of 2026, production from major overseas lithium resource projects saw a slight decrease, while selling price increases accelerated.
According to company announcements, combined production of spodumene concentrate from major overseas lithium miners reached approximately 1.142 million tonnes in Q1 2026, a 3% decline quarter-over-quarter but a 17% increase year-over-year.
Quarterly increases primarily came from Pilbara Minerals and Sigma Lithium's production restart, while decreases were noted from Wodgina and Mt Holland.
The average selling price for overseas spodumene concentrate in Q1 2026 widened significantly, reaching around $2,000 per tonne, nearly doubling from the previous quarter.
South American Brine Operations
Lithium product sales volumes from South American brine operators Albemarle and SQM in Q1 2026 were 53,000 tonnes and 62,000 tonnes, respectively.
Output from Ganfeng Lithium, Lithium Americas, Rio Tinto, and Eramet showed mixed quarterly changes, with the combined shipment volume for these major players falling 13% quarter-over-quarter to 143,000 tonnes.
The average selling prices for Albemarle and SQM's lithium products in Q1 were $16,800/tonne and $17,800/tonne, marking significant quarter-over-quarter increases of 40% and 78%, respectively.
Australian Mine Restart Wave
Stimulated by the sharp price rise early in 2026, several Australian lithium mines announced restarts or expansions, including the Ngungaju project, Bald Hill, and the Finniss mine, collectively adding potential annual LCE capacity of around 70,000 tonnes.
These projects are expected to begin shipments and contribute to effective supply from Q4 2026.
Expansion projects at Mt Marion, Pilbara Minerals' P2000, and Elevra Lithium's NAL are also reportedly being accelerated.
Supply Growth Challenges
Supply growth continues to face hurdles. The Greenbushes mine lowered its production guidance for FY2026 by over 20,000 tonnes LCE due to factors like slow ramp-up.
Furthermore, several African nations are tightening controls on lithium resource development. Zimbabwe has reinstated spodumene exports but introduced mandatory state equity requirements after classifying lithium as a critical mineral.
The Democratic Republic of Congo raised lithium royalty rates to 10% in May 2026. These developments introduce uncertainty for the previously fast-growing supply from Africa.
Price Outlook and Investment Implications
Looking back at the 2020-2022 price cycle, lithium prices experienced a consolidation phase during the uptrend from April to July 2021.
Since May 2026, concerns over demand suppression due to high prices and increasing exchange warehouse receipts have led to a price pullback.
The report suggests prices may enter a new period of consolidation, awaiting further validation of downstream demand and clearer supply-demand dynamics.
Considering persistently high growth rates in energy storage battery demand and frequent supply-side disruptions, the report deems it premature to declare a definitive price peak.
Prices are still anticipated to strengthen in the second half of the year, with the firm maintaining its lithium price target of 250,000 yuan per tonne.
The report concludes by advising investors to monitor potential allocation opportunities following sector adjustments.
Risk Factors
Key risks identified include a sharp decline in lithium prices, weaker-than-expected demand growth for power and energy storage batteries, overseas lithium supply growth exceeding expectations, and policy or operational risks associated with companies' overseas lithium resource development.
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