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

Huatai Securities research report believes that the liquidity contraction and changes in risk appetite brought about by the Middle East events have led to a weak fluctuation in lithium prices in the early stages. However, considering the supply disruption risks in the Yichun region domestically and overseas in Zimbabwe still exist in the second half of the year, and the demand side’s high oil prices are expected to boost the demand for electric vehicles and energy storage, if we assume a neutral expectation for 2026 (with global sales of new energy vehicles growing 10%-15% year-on-year and energy storage cell shipments growing 50%-60% year-on-year), global lithium carbonate is expected to maintain a tight balance between supply and demand.

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Huatai | Non-ferrous: Energy restructuring opens a new “lithium” journey

Core view

We believe that the liquidity contraction and changes in risk appetite brought about by the Middle East events have led to a weak fluctuation in lithium prices in the early stages. However, considering the supply disruption risks in the Yichun region domestically and overseas in Zimbabwe still exist in the second half of the year, and the demand side’s high oil prices are expected to boost the demand for electric vehicles and energy storage, if we assume a neutral expectation for 2026 (with global sales of new energy vehicles growing 10%-15% year-on-year and energy storage cell shipments growing 50%-60% year-on-year), global lithium carbonate is expected to maintain a tight balance between supply and demand.

With the increase in the energy storage capacity per vehicle, the production of power batteries and the growth rate of new energy vehicle sales are diverging.

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

High-frequency data for energy storage is positive, and the increased penetration of large cells is expected to support lithium price space.

According to SMM data, in January-February 2026, domestic energy storage cell production totaled 119.09GWh, a year-on-year increase of 91%. According to the Dazhong Times database, in March 2026, the total planned production of the lithium battery market was about 219GWh, a month-on-month increase of 16.5%, with the share of energy storage cell planned production increasing to 40.6%, up from 37.7% at the beginning of the year. With the 314Ah cell being the market mainstream and production lines running at full capacity, super-large cells like Yiwei Lithium Energy’s 587Ah and Chuangneng New Energy’s 628Ah have emerged, which aim to reduce the number of cells and simplify system structures. Large cells are expected to further lower the integration costs of energy storage systems, providing more room for lithium price increases. Overseas, driven by cost and structural adjustments due to energy security, the penetration of new energy + energy storage projects in the Middle East and Europe may accelerate in the medium to long term.

The supply side of lithium is also playing out a story similar to “copper.”

Unlike the quota system for rare earths and tungsten or the 45 million tons of production capacity for electrolytic aluminum, lithium supply may lack hard constraints. However, we believe that lithium is also playing out a story similar to “copper” in recent years: (1) Capital expenditures by major global lithium mining companies are expected to decline by 2024; (2) Under the backdrop of the resurgence of resource democracy and Monroeism, various countries are frequently changing policies regarding strategic metal storage, export restrictions, and tax increases, increasing overseas supply risks; (3) Some major Australian lithium mines have also seen declines in ore grades in recent years, such as Greenbush confirming that the lithium oxide grade of its ore reserves has dropped from 3.2% in 2021 to 2.6% in 2024.

Under neutral assumptions, global lithium carbonate will be in a tight balance in 2026.

If we assume a neutral expectation for 2026 (with global sales of new energy vehicles growing 10%-15% year-on-year and energy storage cell shipments growing 50%-60% year-on-year), global lithium carbonate is expected to be in surplus by 2.4%-6.4%, maintaining a tight balance between supply and demand.

Risk warning: Downstream demand and lithium prices may fall short of expectations, and supply-side expansion may progress faster than expected.

(Source: Yicai)