A piece of news regarding an export tax rebate has pushed lithium carbonate prices to a climax, with futures contracts hitting limit-up across the board. Recently, displaying an unstoppable momentum, the market has entered an accelerated upward channel, with prices surging as much as 40% in just seven trading days in January, sparking a狂欢 (huānhuáng -狂欢) in the lithium battery sector. It is understood that a recent announcement from the Ministry of Finance and the State Taxation Administration states that, from April 1, 2026, to December 31, the value-added tax export rebate rate for battery products will be reduced from 9% to 6%, and will be completely abolished from January 1, 2027. Boosted by this news, lithium carbonate futures contracts all hit limit-up, with the main contract, 2605, locking in a limit-up from the open. The main contract again hit limit-up the following day, bringing its year-to-date gain for 2026 to 40%. The lithium battery sector in Hong Kong and A-shares followed with significant gains, led by the A-H share leader GANFENGLITHIUM (01772), which rose nearly 10% over two days in Hong Kong.
In reality, the sustained sharp rise in lithium carbonate prices is primarily driven by three fundamental factors: Firstly, low inventory levels, where demand has already surpassed supply; for instance, estimated total supply of lithium carbonate in December 2025 was 119,810 tonnes, while total demand was 127,767 tonnes, resulting in demand exceeding supply by 7,957 tonnes. Secondly, policy stimulus has triggered a wave of stockpiling by battery manufacturers, leading to a seller's market amidst tight supply. Thirdly, optimistic prospects, with exports and energy storage becoming the core variables for surging demand. The lithium battery sector is highly sensitive to lithium carbonate prices; driven by price recovery in 2025, most stocks in the Hong Kong and A-share lithium battery sector essentially doubled, with GANFENGLITHIUM and TIANQI LITHIUM (09696) seeing H-share gains of 1.6 times and 1.1 times respectively. With lithium carbonate's strong start in 2026, can the lithium battery sector continue its substantial gains?
The V-shaped reversal in 2025 saw lithium carbonate prices double in the last three months. The rapid development of new energy since 2020 led to a surge in demand for upstream lithium carbonate, causing prices to skyrocket to a peak of 600,000 yuan per tonne. The two years from 2020 to 2021 created a doubling trend for the entire lithium battery industry chain, with leading sub-sector companies even seeing tenfold gains, such as A-share CATL (03750) and GANFENGLITHIUM, which both achieved over tenfold increases. However, blind capacity expansion led to oversupply, and prices began to collapse. After 2022, the lithium battery industry chain entered a prolonged bear market, with leading company GANFENGLITHIUM falling 65% during the 2022-2024 period. Lithium carbonate prices experienced a V-shaped reversal in 2025; while still in a downward trend in the first half of the year, they hit a yearly low of 59,000 yuan per tonne in June. In the second half of the year, the rise of the "anti-involution" trend, along with measures such as production halts, maintenance, and price increase initiatives, pushed prices into a V-shaped reversal. Particularly since October, frequent favorable policies, coupled with significant improvements in supply and demand and continuous capital inflows, have accelerated the rise in lithium carbonate prices. According to spot price data from 100ppi.com, as of January 12, 2026, the spot price was 145,000 yuan per tonne, compared to a low of 73,000 yuan per tonne three months prior, representing an increase of nearly 100%, and a 1.46-fold increase from last year's low.
This "export tax rebate" news triggered a historically rare limit-up for all lithium carbonate futures contracts. Although the price of the main futures contract has already doubled in the past three months, several brokerages and investment banks remain cautious about the future outlook. Among them, CITIC Futures believes that in the short term, the export tax rebate creates an incentive for batteries and related products to be rushed for export, boosting demand for upstream lithium carbonate. In the medium to long term, the complete cancellation of the rebate will increase corporate costs, compress profit margins, and somewhat inhibit order rhythms, constituting a neutral-to-bearish impact. However, it is important to note that major funds have been frantically speculating on lithium carbonate recently, posing huge short-term volatility risks. Returning to fundamentals, the sustainability of the lithium carbonate price increase depends on whether there is substantive improvement on both the supply and demand sides of the industry chain, and whether new variables emerge on the demand side to support rising prices.
Supply and demand remain tight, with profit margins potentially leading to downstream bargaining. From the supply side, supply and demand are currently basically balanced, with total demand exceeding total supply in December 2025, and a tight situation expected in January. Regarding inventory, destocking has been persistent since the second half of last year, coupled with production halts and maintenance during the period, bringing inventory basically to bottom levels, which also led to the policy-driven stockpiling wave. Trend-wise, policy remains the most critical factor influencing future capacity supply. There is an expectation of tightening lithium carbonate "capacity" in the future, mainly because "anti-involution" will remain an industry theme in 2026, with policies comprehensively addressing "involution-style" competition and strictly controlling new capacity. In January of this year, government departments issued the "Notice on the Solid Waste Comprehensive Management Action Plan,"原则上 (yuánzé shàng -原则上) no longer approving the construction of mineral processing projects without self-owned mines or supporting tailings utilization and disposal facilities. Simultaneously, multiple departments jointly held a symposium on the power and energy storage battery industry to study and deploy work related to standardizing industrial competition秩序 (zhìxù -秩序), maintaining high intensity in anti-involution efforts.
However, new growth variables have emerged on the demand side, namely the high energy consumption of AI and data centers, robotics, and the development of the low-altitude economy, which are accelerating the wave of energy storage construction. Global energy storage maintains a high growth trend. According to a Zhongtai Securities research report, global energy storage battery shipments are预计 (yùjì -预计) to reach 599 GWh in 2025, a year-on-year increase of 71%, and are expected to maintain 46% growth in 2026, reaching 874 GWh, with grid-side and generation-side energy storage accounting for 76.4%. Data shows that from January to November 2025, the domestic energy storage market completed 901 procurement bids, with a total scale reaching 106 GW / 376.486 GWh. Lithium iron phosphate (LFP) is the absolute mainstream technology route, accounting for 92.9%, indicating that LFP占据 (zhànjù -占据) core demand in the energy storage field. Furthermore, the future mass production of solid-state batteries will also drive demand growth. Some participants have already unveiled related products; for instance, Xinjie Energy's solid-state lithium metal battery production line has officially commenced operation, with the first 2 GWh of products下线 (xiàxiàn -下线). The soft-pack "Falcon" battery boasts an energy density of 480 Wh/kg. Finnish startup DonutLab announced the launch of a mass-producible all-solid-state battery with an energy density of 400 Wh/kg. However, industry leader CATL is relatively conservative; its chairman Zeng Yuqun stated last December that mass production of all-solid-state batteries was seven years away, indicating that mass production still requires time, but also bringing expectations for incremental demand.
The penetration rate of new energy vehicles in China exceeded 50% in 2025. Due to the high base, growth in 2026 is expected to slow down. However, penetration rates in major global consumer countries are far lower than in China, leaving significant room for growth in overseas markets. Moreover, energy storage and solid-state batteries bring new variables, making overall growth still relatively optimistic. Zhongtai Securities预计 (yùjì -预计) that the total global shipments of power and energy storage batteries will reach 2313 GWh in 2026, a year-on-year increase of 25%. Amid low inventory, limited capacity, and cautious expansion, the持续 (chíxù -持续) tight supply-demand situation will provide strong support for industry chain prices. However, it must be considered that current lithium carbonate prices far exceed cost prices, leaving substantial profit margins. Price transmission may hinder the development of the downstream industry chain, triggering downstream bargaining. For instance, rising end-demand prices could抑制 (yìzhì -抑制) consumption, leading to疲软 (píruǎn -疲软) growth in energy storage and new energy vehicles, which would feedback to battery manufacturers, who might in turn resist upstream price increases. The upstream and downstream segments of the industry chain may need to find a new equilibrium point,既要 (jì yào -既要) implementing "anti-involution" policies while also avoiding a prisoner's dilemma, to find the optimal path for industry chain development.
Earnings growth expectations are high, focus on upstream lithium leaders. In reality, there are temporal and spatial differences in the price transmission cycle between the upstream and downstream of the lithium battery industry chain. Downstream concentration is high, with the market share基本 (jīběn -基本) controlled by CATL, which has strong bargaining power and lower price sensitivity. During the years of overcapacity, most upstream lithium companies were in a loss-making state, while downstream players maintained robust profitability. The current recovery in lithium carbonate prices brings profit expectations for the upstream sector. From an investment perspective, the direct beneficiaries of the lithium carbonate price increase are upstream lithium mining and lithium product suppliers. The leading Hong Kong-listed companies are primarily GANFENGLITHIUM and TIANQI LITHIUM. GANFENGLITHIUM has a full industry chain布局 (bùjú -布局) encompassing lithium mining, lithium products, and lithium batteries. Its lithium battery business is developing rapidly, with its contribution to revenue持续 (chíxù -持续) increasing. It is promoting the development of solid-state battery technology and has achieved initial mass production of its first-generation semi-solid-state battery. It is also actively布局 (bùjú -布局) energy storage; its subsidiary GANFENG Lithium Battery won a bid for China Power Construction's 1.6 GWh grid-forming energy storage system project, and the energy storage segment is expected to form a significant contributor to performance growth. The company plans to form an annual lithium product supply capacity of no less than 600,000 tonnes LCE by 2030, covering various pathways including brine, ore, clay, and recycled lithium. With its full industry chain layout, the company has a high self-sufficiency rate for upstream lithium resources, reaching 50%, meaning the cost of lithium carbonate exerts less pressure on its downstream business costs. Lithium products are expected to be the core contributor to the company's performance. In the third quarter of 2025, the company returned to profitability, releasing a positive signal. Furthermore, given the industry's high prospects, the company's energy storage and solid-state battery businesses have the potential to become core growth drivers.
Compared to GANFENGLITHIUM, TIANQI LITHIUM's business is more纯粹 (chúncuì -纯粹), focusing mainly on the supply of lithium minerals and lithium products, but with a global layout of lithium resource assets, and lithium mining and chemical production capacity. As of the first half of 2025, the company's lithium chemical capacity was 91,600 tonnes. In the third quarter, its Zhangjiagang 30,000-tonne lithium chemical project was completed and entered the integrated trial operation stage, further increasing its lithium salt capacity. In terms of performance, it achieved a return to profitability in the first half of 2025 through cost control. With the surge in lithium carbonate prices in the second half, it is expected to deliver strong full-year profit performance.
Overall, the持续 (chíxù -持续) surge in lithium carbonate prices is fundamentally based on changing fundamental expectations. In the short term, the stockpiling wave,叠加 (diéjiā -叠加) with major capital riding the trend, has created an extreme market condition driven by the resonance of spot and futures prices. Future supply and demand are expected to remain tight, with clear expectations for demand增量 (zēngliàng -增量), providing strong support for prices, and a long-term outlook of fluctuating upwards is anticipated. However, short-term price fluctuations are significant, risks are high, and there is a risk of correction. For the lithium battery sector, its high sensitivity to lithium carbonate prices means it is affected by price trends in both the short and long term. In the long run,作为 (zuòwéi -作为) industry leaders, GANFENGLITHIUM and TIANQI LITHIUM possess high earnings growth expectations and offer a favorable risk-reward profile.
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