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 events in the Middle East led the lithium price in the earlier period to trade in a relatively weak, range-bound manner. However, given that supply disruption risks still exist in the second half of the year in domestic Yichun and in overseas regions such as Zimbabwe, and that on the demand side, high oil prices are expected to boost demand for electric vehicles and energy storage, if in 2026 we follow the neutral scenario assumptions (global sales of new energy vehicles growing year-on-year by 10%-15%, and energy storage battery-cell shipments growing year-on-year by 50%-60%), global lithium carbonate is expected to maintain a tight balance between supply and demand.

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Huatai | Non-ferrous Metals: The Energy Restructuring Begins a New “Lithium” Journey

Key Viewpoints

We believe that the liquidity contraction and changes in risk appetite brought about by events in the Middle East led the earlier lithium price to trade in a relatively weak, range-bound manner. But considering that in the second half of the year, supply disruption risks still exist in domestic Yichun and overseas regions such as Zimbabwe, and that on the demand side, high oil prices are expected to boost expectations for electric vehicle and energy storage demand, in 2026, if we assume a neutral outlook (global new energy vehicle sales growing year-on-year by 10%-15%, and energy storage cell shipments growing year-on-year by 50%-60%), global lithium carbonate is expected to maintain a tight balance between supply and demand.

With an increase in battery charge per vehicle, production of power batteries and the growth rate of new energy vehicle sales diverge

According to data from the China Automotive Power Battery Industry Innovation Alliance, in January to February 2026, the average charge per vehicle for pure electric passenger cars in China was 65.4Kwh, up 22.5% year-on-year; for plug-in hybrid passenger cars, it was 35.7Kwh, up 38.6% year-on-year. Because the charge per vehicle increases significantly, even though domestic new energy vehicle sales decline year-on-year, power battery output still maintains year-on-year growth. In January to February 2026, total domestic new energy vehicle sales reached 1.7096 million units, down 6.9% year-on-year. According to SMM data, in January to February 2026, total domestic power battery cells produced were 210.55GWh, up 38.4% year-on-year.

Energy storage data trends strongly in the near term; rising penetration of large cells is expected to support room for lithium prices

According to SMM data, in January to February 2026, total domestic energy storage battery-cell output was 119.09Gwh, up 91% year-on-year. According to the Databank of Datong Times, in March 2026 the total scheduled production in the lithium battery market is about 219Gwh, up 16.5% month-on-month; among this, the share of energy storage cell scheduled production increases to 40.6%, versus 37.7% at the start of the year. Under the background that 314Ah cells are the market mainstream and production lines are operating at full capacity, energy storage in 500Ah+ ultra-large cells such as Yiwei Lithium Energy 587Ah and CTT New Energy 628Ah has already appeared. By reducing the number of cells and simplifying the system structure, large cells are expected to further lower energy storage system integration costs, which could provide more upside space for lithium prices. Overseas, driven by cost pressures and structural adjustments caused by energy security, in the medium to long term, new energy + energy storage projects may accelerate penetration in the Middle East and Europe.

On the supply side, lithium is also playing a story similar to “copper”

Unlike the quota system for rare earths and tungsten, and the 45 million-ton capacity for electrolytic aluminum, lithium supply may lack hard constraints. But we believe that in recent years, a “copper”-like story for lithium is unfolding as well: (1) global capital expenditures of major lithium mining companies showed a turning point and declined in 2024; (2) against the backdrop of the re-emergence of resource nationalism and Monroe Doctrine-style policies, policy changes such as strategic metal stockpiling, restrictions on exports, and increases in tax rates occur frequently across countries, increasing overseas supply risks; (3) some leading lithium mines in Australia have also seen declines in reserve grade in recent years—for example, Greenbush has confirmed that the lithium oxide grade in ore reserves fell from 3.2% in 2021 to 2.6% in 2024.

Under the neutral assumption, in 2026 global lithium carbonate is in a tight balance

If in 2026 we follow the neutral scenario assumptions (global new energy vehicle sales growing year-on-year by 10%-15%, and energy storage battery-cell shipments growing year-on-year by 50%-60%), global lithium carbonate is expected to be in surplus of 2.4%-6.4%, and will maintain a tight balance between supply and demand.

Risk warning: Downstream demand and lithium prices underperform expectations; progress on capacity expansion on the supply side exceeds expectations, etc.

（Source: First Financial）