Huatai Securities: Global lithium carbonate is expected to maintain a tight supply and demand balance

Huatai Securities Research Report believes that liquidity contraction and changes in risk appetite caused by Middle East events have led to earlier lithium prices experiencing weak fluctuations. However, considering that supply disruption risks still exist in the Yichun region domestically and Zimbabwe overseas in the second half of the year, and that high oil prices on the demand side are boosting expectations for electric vehicle and energy storage demand, if we assume a neutral outlook in 2026 (global new energy vehicle sales year-on-year growth of 10%-15%, energy storage cell shipments year-on-year growth of 50%-60%), the global lithium carbonate market is expected to remain in a tight supply-demand balance.

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Huatai | Nonferrous Metals: Energy Restructuring Opens a New “Lithium” Journey

Key Points

We believe that liquidity contraction and risk appetite changes caused by Middle East events have led to weak fluctuations in lithium prices. However, considering the ongoing supply disruption risks in Yichun domestically and Zimbabwe overseas in the second half of the year, and the boost from high oil prices on electric vehicle and energy storage demand expectations, if we assume a neutral outlook in 2026 (global new energy vehicle sales growth of 10%-15% year-on-year, energy storage cell shipments growth of 50%-60%), the global lithium carbonate market is likely to maintain a tight supply-demand balance.

Increased Battery Capacity per Vehicle Diverges from Growth in Electric Vehicle Sales and Battery Production

According to data from the China Automotive Power Battery Industry Innovation Alliance, in January-February 2026, the average battery capacity per pure electric passenger vehicle in China was 65.4 kWh, up 22.5% year-on-year; plug-in hybrid passenger vehicles had an average capacity of 35.7 kWh, up 38.6%. Due to the significant increase in battery capacity per vehicle, despite domestic new energy vehicle sales declining year-on-year, battery production still maintained growth. In January-February 2026, domestic new energy vehicle sales totaled 1.7096 million units, down 6.9% year-on-year. According to SMM data, total domestic power cell production in January-February 2026 was 210.55 GWh, up 38.4% year-on-year.

Positive Outlook for Energy Storage Data and Increased Penetration of Large Cells May Support Lithium Prices

According to SMM data, energy storage cell production in China in January-February 2026 totaled 119.09 GWh, up 91% year-on-year. Based on data from Dato Times, the total planned lithium battery production in March 2026 was approximately 219 GWh, a 16.5% increase month-on-month, with energy storage cells accounting for 40.6% of the planned production, up from 37.7% at the beginning of the year. With 314 Ah cells being mainstream and production lines operating at full capacity, ultra-large cells such as EVE Lithium’s 587 Ah and Chuaneng New Energy’s 628 Ah (over 500 Ah) have emerged. By reducing the number of cells and simplifying system architecture, large cells are expected to further lower energy storage system integration costs, providing more room for lithium price increases. Overseas, due to cost-driven and energy security-related structural adjustments, the penetration of new energy and energy storage projects in the Middle East and Europe may accelerate in the medium to long term.

Lithium Supply is Also Playing a “Copper”-like Story

Unlike quota systems for rare earths and tungsten, or the 45 million-ton aluminum capacity, lithium supply lacks hard constraints. However, we believe that in recent years, a “copper”-like story is also unfolding for lithium: (1) Capital expenditure by major global lithium miners is expected to decline after a turning point in 2024; (2) Against the backdrop of resurging resource democratization and Monroe Doctrine, many countries are frequently changing policies such as strategic metal stockpiling, export restrictions, and tax increases, increasing overseas supply risks; (3) Some major Australian lithium mines have also shown declining ore grades in recent years, with Greenbush confirming that lithium oxide content in reserves dropped from 3.2% in 2021 to 2.6% in 2024.

Neutral Scenario: Global Lithium Carbonate Market in Tight Balance in 2026

If we assume a neutral outlook in 2026 (global new energy vehicle sales growth of 10%-15% year-on-year, energy storage cell shipments growth of 50%-60%), global lithium carbonate oversupply is expected to be 2.4%-6.4%, maintaining a tight supply-demand balance.

Risk Tips: Downstream demand and lithium prices underperform expectations, supply-side capacity expansion progresses faster than expected.

(Article Source: First Financial)