CITIC SEC: Resonance of supply and demand benefits opens up upward space for lithium prices

CITIC SEC released a research report stating that recent disturbances in the supply of lithium resources in Africa have not been resolved, and domestic lithium mica supply may face new variables. Greenbushes lithium mine has lowered its annual production guidance, while the marginal increase in South American lithium salt exports is declining, leading to an overall contraction in supply in the next 2-3 months. The demand for power and energy storage batteries in 2026 exceeds expectations, with lithium battery production in May increasing month-on-month. CITIC SEC predicts that the resonance of supply and demand benefits is expected to drive lithium prices to rise to 250,000 yuan per ton in the next 2-3 months. Key points from CITIC SEC include: The disturbance in the supply of lithium resources in Africa has not been resolved, and domestic lithium mica supply may face new variables. According to SMM and Mysteel, on February 25, the Zimbabwe Ministry of Mines announced the immediate suspension of all exports of lithium ores and lithium concentrates (including goods in transit). Several companies were granted licenses to export lithium ores on April 13. However, no Zimbabwean lithium mining company has announced the formal export of lithium concentrates so far. The transport time from Zimbabwe to China is approximately 3 months, meaning that no Zimbabwean lithium concentrates will be transported to China from the end of May to August. According to the official website of the Jiangxi Provincial Department of Natural Resources, the assessment report on the transfer of mining rights for four porcelain clay mines in Yichun was publicized on April 7. We believe this means that the four porcelain clay mines in Yichun will also enter the process of changing mining permits. Referring to the Xianxiawo mine, we expect the remaining porcelain clay mines in Yichun to face the risk of suspension. According to the announcement of the relevant companies, the four porcelain clay mines have an annual production of 75,000 tons of LCE. If they are suspended, it will lead to a loss of production of 6,000 tons of LCE per month. Chile's lithium salt exports decreased month-on-month, and the world's largest lithium mine lowered its production guidance. According to Mysteel, Chile's total lithium salt exports in April 2026 were 37,600 tons of LCE, a decrease of 5.1% month-on-month. Of this, lithium carbonate exports were 29,500 tons, an increase of +35.6%/+3.4% month-on-month; lithium sulfate exports were 12,100 tons, an increase of +33.6%/ -26.9% month-on-month. Chilean lithium salt exports have been at historical high levels for four consecutive months, with a slight decrease in April. We expect Chilean lithium salt inventories to continue to decline, and the monthly export volume may be difficult to increase sustainably. According to the announcement of IGO, the world's largest lithium mine, Greenbushes lithium mine, lowered its production guidance for the 2026 fiscal year from 1.5-1.65 million tons to 1.375-1.425 million tons, a decrease of 175,000 tons from the middle value, exceeding 20,000 tons of lithium carbonate equivalent, mainly due to various production disturbances and CGP3 production capacity ramping up lower than expected. We believe that the incremental supply of Australian lithium resources in 2026 is lower than expected, South American lithium supply is expected to decrease marginally in the coming months, the stimulus of high lithium prices on global lithium supply is not as expected, and the tight supply trend is expected to be maintained throughout the year. The installation volume of power batteries is rebounding, and the demand for energy storage continues to exceed expectations. According to Wind, in April 2026, the production of power batteries and other batteries by China Shipbuilding Industry Group Power was 183.9 GWh, an increase of 55.6% and 3.5% month-on-month, with a total production of 671.2 GWh from January to April, an increase of 51.0% year-on-year, maintaining a high growth rate. The installation volume of power batteries in April was 62.3 GWh, an increase of 10.3% and 15.2% month-on-month, with an installation volume of 187.2 GWh from January to April, an increase of 1.5% year-on-year. The growth in the installation volume of power batteries was mainly due to the normalization of the growth rate of new energy vehicle sales from January to April. The sales of energy storage batteries in China increased by 100.4% year-on-year in the first four months, reaching 200.4 GWh. Due to the substitution effect brought about by the increase in energy costs from February to April, the demand for energy storage batteries at home and abroad continued to improve, and the market has become more recognized in the long-term return on investment of energy storage stations. According to Securities Daily, the first institutional REITs product with an energy storage station as the underlying asset was issued in April of this year, which will bring more capital into the energy storage industry, provide exit paths for energy storage companies, drive more demand for energy storage projects, and we continue to be bullish on the long-term demand for energy storage batteries. Lithium salt inventory has fallen to a very low level, and we expect lithium prices to rise to 250,000 yuan per ton. According to SMM, the demand for lithium carbonate in China in April was 140,000 tons. Last week, the inventory of lithium carbonate decreased by 920 tons to 103,000 tons, indicating that the current inventory level is only three weeks, with smelter inventory at 19,000 tons, at a very low level. We expect this to prompt upstream and downstream companies to be cautious in selling or stocking up early. According to Dadi Times Think Tank, lithium battery production increased by 6% month-on-month in May. Against the background of continuing increasing demand, disturbances in lithium mineral supply at home and abroad, we expect lithium salt supply to continue to be in short supply in the next 2-3 months, and the excess industrial inventory will provide stronger momentum for lithium prices. Therefore, we expect lithium prices to rise to 250,000 yuan per ton, with the peak demand season in the fourth quarter expected to drive lithium prices to even higher levels. We continue to recommend investment opportunities in lithium mining stocks. Risk factors: Dissipation of disturbances in global lithium resource supply; unexpected increase in global lithium resource supply; power battery demand falling short of expectations; energy storage battery demand suppressed by high lithium prices. Investment strategy: Recently, disturbances in the supply of lithium resources in Africa have not been resolved, and domestic lithium mica supply may face new variables, the Greenbushes lithium mine has lowered its annual production guidance, and the domestic lithium salt production in the next 2-3 months is expected to be lower than expected, with a marginal decrease in South American lithium salt exports, leading to an overall contraction in the supply side. The demand for power and energy storage batteries in 2026 exceeds expectations, and lithium battery production in May has increased month-on-month. We expect that the resonance of supply and demand benefits will drive lithium prices to rise to 250,000 yuan per ton in the next 2-3 months. Growth-oriented and low-cost targets are expected to fully benefit from the increase in lithium prices.