CITIC SEC has released a research report stating that a confluence of supply constraints and strong demand is likely to drive lithium prices higher. Recent supply disruptions from Africa remain unresolved, while domestic lepidolite supply in China faces new uncertainties. The Greenbushes lithium mine has reduced its annual production guidance, and marginal export growth from South American lithium producers has declined, pointing to an overall supply contraction over the next 2-3 months. Concurrently, demand for power and energy storage batteries in 2026 is exceeding expectations, with lithium battery production schedules for May showing a month-on-month increase. CITIC SEC forecasts that this positive alignment of supply and demand factors could push lithium prices to 250,000 yuan per ton within the next 2-3 months. The key points from the report are as follows.
Supply disruptions from African lithium resources persist, and China's domestic lepidolite supply may face new variables. According to SMM and Mysteel, Zimbabwe's Ministry of Mines announced an immediate suspension of all raw ore and lithium concentrate exports on February 25. While several companies received export permits on April 13, no Zimbabwean lithium mining company has yet announced the formal export of lithium concentrate. The shipping period from Zimbabwe to China is approximately three months, indicating that no Zimbabwean lithium concentrate will arrive in China from late May through August. Furthermore, materials including the assessment reports for mining rights transfer fees for four porcelain clay mines in Yichun, Jiangxi province, were publicly disclosed on April 7. This suggests these mines will also enter the process of renewing their mining licenses. Drawing parallels with the Jianxiawo mine, CITIC SEC anticipates the remaining Yichun porcelain clay mines may also face suspension risks. According to relevant company announcements, these four mines have an annual production capacity of 75,000 tons of lithium carbonate equivalent (LCE). A suspension would result in a monthly production loss of 6,000 tons of LCE.
Chilean lithium exports have declined month-on-month, and the world's largest lithium mine has lowered its production guidance. According to Mysteel, Chile's total lithium salt exports in April 2026 amounted to 37,600 tons of LCE, a decrease of 5.1% from the previous month. Within this, lithium carbonate exports were 29,500 tons, up 35.6% year-on-year and 3.4% month-on-month. Lithium sulfate exports for the month were 12,100 tons, increasing 33.6% year-on-year but falling 26.9% month-on-month. Although Chilean lithium exports have remained at historically high levels for four consecutive months, the slight drop in April suggests inventories are depleting, and subsequent monthly export volumes may struggle to sustain growth. According to an IGO announcement, the Greenbushes lithium mine, the world's largest, has revised its production guidance for fiscal year 2026 downward from 1.50-1.65 million tons to 1.375-1.425 million tons. The midpoint reduction of 175,000 tons, equivalent to over 20,000 tons of LCE, is attributed to various production disruptions and slower-than-expected ramp-up of the CGP3 production line. CITIC SEC believes lithium supply growth from Australia in 2026 will fall short of expectations, South American supply will see marginal reductions in the coming months, and high lithium prices have not stimulated global supply as anticipated, suggesting a trend of tight supply may persist throughout the year.
Power battery installations are recovering, and energy storage demand continues to exceed expectations. According to Wind data, China's production of power batteries and other batteries reached 183.9 GWh in April 2026, up 55.6% year-on-year and 3.5% month-on-month. Cumulative production from January to April totaled 671.2 GWh, a 51.0% year-on-year increase, maintaining a high growth rate. Power battery installations in April were 62.3 GWh, rising 10.3% year-on-year and 15.2% month-on-month. Cumulative installations from January to April reached 187.2 GWh, a 1.5% year-on-year increase. The growth in power battery installations is primarily driven by a return to positive growth in new energy vehicle sales from January to April. Domestic energy storage battery sales from January to April were 200.4 GWh, surging 100.4% year-on-year. Due to substitution effects from rising energy costs between February and April, demand for energy storage batteries both domestically and internationally remains robust, with the market showing greater recognition of the long-term returns from energy storage power stations. The issuance of China's first inter-institutional REIT product based on an energy storage power station asset in April this year is expected to channel more capital into the sector, provide exit paths for energy storage companies, and stimulate further demand for energy storage projects. CITIC SEC maintains a positive long-term outlook for energy storage battery demand.
Lithium salt inventories have fallen to extremely low levels, supporting the forecast for prices to reach 250,000 yuan/ton. According to SMM, domestic lithium carbonate demand in April was 140,000 tons. Last week, lithium carbonate inventories decreased by 920 tons week-on-week to 103,000 tons, representing only about three weeks of inventory. Smelter inventories stand at 19,000 tons, an extremely low level that is expected to prompt both upstream and downstream companies to hold back sales or build inventory in advance. According to the Great East Times Think Tank, domestic battery production schedules for May show a 6% month-on-month increase. Against this backdrop of sustained demand growth and ongoing supply disruptions from domestic and international lithium mines, CITIC SEC anticipates a continued shortage of lithium salt supply over the next 2-3 months. Furthermore, industry-wide excess inventory building will provide additional upward momentum for lithium prices. Therefore, the firm expects lithium prices to rise to 250,000 yuan/ton, with the peak demand season in the fourth quarter potentially driving prices even higher. Investment opportunities in lithium mining stocks are recommended.
Risk factors include: the subsiding of global lithium resource supply disruptions; global lithium supply exceeding expectations; power battery demand falling short of expectations; and energy storage battery demand being suppressed by high lithium prices.
Investment strategy: Recent unresolved supply disruptions in Africa, potential new variables for domestic lepidolite supply in China, the downward revision of annual production guidance by the Greenbushes mine, and declining marginal export growth from South America collectively point to an overall supply contraction over the next 2-3 months, with domestic lithium salt production likely below expectations. Meanwhile, demand for power and energy storage batteries in 2026 is exceeding forecasts, and lithium battery production schedules for May are increasing month-on-month. CITIC SEC expects the positive interplay of these supply and demand factors to drive lithium prices to 250,000 yuan/ton within the next 2-3 months. Companies with strong growth potential and lower costs are positioned to benefit significantly from the rising lithium price.
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