Guotou Securities: Demand expansion may lead to sustained lithium price prosperity, and the industry's high profit cycle is expected to continue.

Guotou Securities published a research report stating that the supply and demand gap provides favorable support for the short-term price of lithium carbonate, and the industry's high profitability cycle is expected to continue. The structural tight balance in China's lithium carbonate industry persists. According to their calculations, the supply-demand gap for lithium carbonate in China is expected to be approximately 46,782 tons by 2026. Meanwhile, the upward trend in oil prices combined with the ongoing deepening of electricity market reforms will further promote the penetration rate of new energy vehicles and the expansion of energy storage capacity, which is expected to continuously strengthen the downstream demand's supportive role for lithium carbonate prices. It is recommended to pay attention to companies with strong cost control capabilities, ample mining capacity, and relatively well-established global resource layouts. The main viewpoints of Guotou Securities are as follows: Supply side: Steady supply increase, short-term disturbances gradually eliminated It is estimated that by 2026, China's total supply of lithium carbonate will reach 1.7248 million tons, a year-on-year increase of 42.77%. Domestic production is expected to be around 1.3938 million tons, a year-on-year increase of 43.63%, with net imports of 331,000 tons, a year-on-year increase of 39.28%. In terms of production processes, spodumene is the main source of lithium carbonate production in China, and by June 2026, the shares of spodumene/lepidolite/salt lake lithium extraction/recycling are expected to be 57.88%/11.99%/17.82%/12.30%, respectively. In addition to domestic capacity, imports also constitute an important supplement to the supply side. By June 2026, Chinas lithium carbonate imports are expected to be 25,900 tons, accounting for 18.32% of the total domestic production and import volume during the same period, with import sources highly concentrated in Argentina and Chile. Looking ahead to the second half of 2026, supply-side disturbances for lithium carbonate are expected to gradually be resolved. Zimbabwe has resumed exports of lithium concentrate, but the arrival time at ports is undetermined. Contemporary Amperex Technology has also regained its safety production license for its lithium mine in Jiangxia, and lithium carbonate supply is expected to steadily increase in the second half of the year. Demand side: Strong downstream consumption continues, with the battery sector as the main consumption driver According to SMM statistics, domestic consumption of lithium carbonate is expected to be approximately 1.2297 million tons in 2025; this report estimates that domestic consumption in 2026 is expected to increase to 1.7716 million tons, a year-on-year increase of 44.07%. In terms of demand structure, power batteries and energy storage batteries are the main driving forces for lithium carbonate consumption. For power batteries, benefiting from the continuous increase in the penetration rate of new energy vehicles, the demand for lithium carbonate is steadily expanding. According to calculations based on relevant papers, the growth of power battery capacity is expected to be 1,000/1,341/1,651 GWh for 2026/2030/2035, respectively, corresponding to lithium carbonate consumption of approximately 700,000/938,700/1,155,700 tons. For energy storage batteries, the reform of the electricity market and green electricity direct connection policies are driving rapid growth in energy storage battery capacity, which has become the second growth engine for lithium carbonate demand. It is estimated that the capacity of energy storage batteries will grow by 750/1,200/1,600 GWh for 2026/2030/2035, respectively, corresponding to lithium carbonate consumption of 525,000/840,000/1,120,000 tons. In addition to power and energy storage batteries, traditional industries such as consumer batteries, glass and ceramics, and lubricants also have corresponding demands for lithium carbonate, but their overall contribution is limited. Risk warnings: Risks of downstream demand falling short of expectations, supply release exceeding expectations, macroeconomic disturbances, global trade conflict risks, and the risk of calculation errors.