After being "washed," Citibank still remains optimistic about lithium prices: AI energy storage is soaring and matching the demand in the second half of the year, the performance of American lithium mining giants is solidifying the fundamentals.

After experiencing an irrational surge in the early stage, the global lithium market has recently entered a period of volatile correction. The stockpile at GFEX, increased supply-side elasticity, and market doubts about short-term demand for end-users have all suppressed the performance of lithium spot prices. However, Citigroup Inc., a Wall Street investment banking giant, pointed out in its latest industry report that the bearish trend in lithium prices has basically exhausted, and the market is currently building a strong bottom. As downstream battery manufacturers complete their destocking cycle and the booming demand for grid-level energy storage ignited by AI data centers, global lithium giants delivered an extremely impressive report card in the first quarter of 2026, signaling that the charge of industrial rebound in the second half of the year has been sounded. Citigroup Inc. predicts that lithium prices will remain in a range-bound volatility in the short term before the market environment becomes more favorable. However, the bank did not specify when the expected consolidation phase would end, nor did it provide a specific timetable for the expected rebound. After being "washed" by the market, Citigroup believes that stop-loss is a risk control measure and does not mean that the direction has been misjudged. The bank admitted its mistake in recommending long trades on CME lithium hydroxide and lithium carbonate futures on May 12, which resulted in forced liquidation in less than a month losing approximately $4,270 per ton for the July 2026 lithium hydroxide contract, and approximately $4,450 per ton for the August 2026 lithium carbonate contract. This resulted in losses of about 17% to 22% in just one month. Citigroup maintains its price forecasts unchanged: a target price of $40,000 per ton for Chinese lithium carbonate in 0 to 3 months and $20,000 per ton in 6 to 12 months. The short-term targets are almost double the current prices. In a report on June 11, Citigroup further reiterated that "lithium prices are highly likely to test the key level of 25,000 yuan per ton". Short-term range-bound volatility, three major catalysts for the second half of the year Citigroup analysts point out that although spot prices have softened recently, most of the downward pressure seems to have become a thing of the past. Until the market experiences stronger marginal improvements, lithium prices will remain in a narrow range-bound volatility in the short term. However, the following three marginal changes will act as catalysts for the price rebound in the second half of the year: Clearance of downstream inventories Battery manufacturers have largely solved the issue of excess inventory that plagued the market throughout 2024 and the beginning of 2025, and lightened-up manufacturers are gradually returning to the spot market. Citigroup's supply and demand balance sheet gives a clear quantitative assessment: a 4% supply gap is expected in the global lithium market in 2026. The market faced an excess of 133,000 tons of lithium carbonate equivalent (LCE) in 2024, with an excess rate of approximately 9%; the excess narrowed to 97,000 tons of LCE in 2025, with an excess rate of approximately 6%; by 2026, the market directly reversed into a shortage of 75,000 tons of LCE demand of 2.08 million tons of LCE compared to supply of 2.005 million tons of LCE. It took just three years to go from surplus to shortage. The explosion in demand far exceeded expectations. In the first four months of this year, China's total battery production reached 874GWh, a year-on-year increase of 41%, with power batteries growing by 22% and energy storage batteries by 99%. Energy storage grew almost doubled, becoming one of the fastest-growing areas of lithium demand. According to Citigroup's research data, in the first quarter, the installed capacity of commercial vehicle batteries of Shanxi Guoxin Energy Corporation increased by 109% year-on-year, reaching 39GWh, with the proportion of overall battery installations jumping from 9% in 2024 to 22%. The battery capacity of a new energy heavy-duty truck is much higher than that of a regular passenger car, making commercial vehicles the "incremental dark horse" in lithium demand. However, the supply side continued to "drop the ball." The restart of a large lithium mine in Jiangxi is still uncertain due to environmental approval; Australian lithium mines have limited increases due to high diesel costs and long restart cycles; and South American salt flat projects are slow to ramp up. Global lithium salt inventories are at historic lows, with domestic inventories lasting less than a month. As of the first week of June, China's total lithium carbonate inventory was 98,786 tons, down 630 tons on a weekly basis, indicating a continued trend of destocking. Lithium spodumene and recycling are ramping up, but lithium mica is shrinking this means that the elasticity of low-cost domestic supply in China is decreasing, and reliance on external imports of concentrates and brines is increasing. Citigroup predicts that although the market may return to a slight oversupply in 2027 and 2028 (25,000 tons and 24,000 tons of LCE), the supply-demand gap in 2026 has almost become a certainty. Seasonal stockpiling cycle + rush for export tax rebates Traditionally, August and September are peak seasons for the global battery industry chain, with downstream players often starting a strong seasonal replenishment in July and August. August and September are the traditional peak seasons, when battery factories have to "work hard". Citigroup emphasizes that Contemporary Amperex Technology's target for battery production in 2026 is 1.2TWh, which means that production in the second half of the year needs to reach 680GWh, a 32% increase from the first half of the year. Contemporary Amperex Technology's new production capacity is expected to come online no later than August or September, bringing about 5,000 to 6,000 tons of incremental lithium demand. In addition, as the policy to reduce export tax rebates in 2027 approaches, a large number of battery core companies are expected to launch a fierce "early delivery rush" in the second half of 2026, which will provide solid support for upstream raw material prices. The other side of the "AI narrative": BESS is becoming the second engine beyond EVs If electric vehicles are the first DRIVE of lithium demand, battery energy storage systems (BESS) are becoming an undeniable "second engine". In the past, the market generally positioned lithium as a simple "commodity for electric vehicles (EVs)", but the market landscape in 2026 has undergone profound changes the power shortages caused by the AI wave are directly translating into rigid demand for grid-level BESS. To ensure that renewable energy sources, such as wind and solar power, can stably supply the explosive growth of AI data centers from 2024 to 2026, utilities in the U.S. and globally are frantically installing large grid-level batteries. Global energy storage battery shipments grew by 76.2% to 651.5GWh in 2025, and the growth rate is expected to remain near 50% in 2026. Industry experts generally expect China's BESS growth rate in 2026 to be around 40% to 60%. Global BESS deployments are expected to achieve a 57% year-on-year increase in 2026. This trend is fundamentally changing the growth structure of lithium demand. According to data from Benchmark Mineral Intelligence, demand for BESS surged by 51% in 2025, while demand for electric vehicles grew by 26%. The research firm predicts that lithium demand may increase by 24% in 2026, while supply is only expected to expand by 19%, indicating that the market will continue to tighten in the next two to three years. Of particular note is the derivative demand brought about by the expansion of AI computing power. As artificial intelligence is deployed at scale, grid constraints are becoming more severe. By 2030, data centers are expected to account for 20% of all BESS installations. This means that the AI boom is not only directly driving demand for semiconductors and electricity, but is also indirectly driving the consumption of lithium resources a chain that leads from "expansion of computing power electricity demand deployment of energy storage systems consumption of lithium" is forming. Ricardo Ramos, CEO of Sociedad Quimica y Minera de Chile S.A. Sponsored ADR Pfd Series B (SQM.US), stated during the Q1 earnings call that global lithium demand is expected to exceed 1.9 million tons of LCE this year, and market dynamics still indicate a tight supply-demand balance. SQM has raised its full-year lithium sales volume guidance for 2026 from the previous 10% to 15%, with an overall market increase of about 25%, with BESS and electric vehicles together forming a dual core DRIVE. Giant performances confirm the cycle In the past year, lithium carbonate prices have nearly doubled. In this context, the rise in lithium prices has been directly reflected in the financial reports of top companies. The two top lithium producers globally showed terrifying profit increases in the first quarter of 2026. Benefiting from long-term contract price protection and cost control, both giants saw their profit margins double. Sociedad Quimica y Minera de Chile S.A. Sponsored ADR Pfd Series B achieved revenue of $1.76 billion in the first quarter of 2026, a 69.8% year-on-year increase, with lithium and derivative product business revenue reaching $1.19 billion, a staggering 135.7% increase. The actual average selling price of lithium in the Atacama Salt Flats was approximately $17.8 per kilogram, a year-on-year increase of about 95%. Of note, SQM's lithium sales volume in the first quarter increased by 25% year-on-year to approximately 69,000 tons of LCE, and management expects lithium sales in the second quarter to exceed the first quarter by more than 10%, setting a record for any calendar quarter. SQM also expects the average realized price in the second quarter to be higher than the first quarter. The performance of American Albemarle Corporation is even more astonishing. Net profit in the first quarter of 2026 soared by 547%, jumping from $49.3 million in the same period last year to $319.1 million. Adjusted earnings per share were $2.95, far exceeding the consensus estimate of $1.09 on Wall Street. Net sales of the energy storage business increased by 69.9%, with lithium price increases contributing 51% and volume growth contributing 14%. The adjusted EBITDA profit margin increased from 24.8% in the same period last year to 46.5%. Over the past 12 months, Albemarle Corporation's stock price has accumulated a gain of over 177%. Citigroup analysts are also optimistic about lithium mining stocks such as American Albemarle Corporation, as they expect a replenishment before the traditional peak season arrives, combined with the upcoming reduction in export tax rebates in 2027, the demand for battery cores will be strong. According to them, downstream battery manufacturers have largely resolved the issue of excess inventory pressures on the market for most of 2024 and the beginning of 2025, and are now re-entering the market to prepare for the historically strong second half of the year. American Albemarle Corporation is the world's largest lithium producer; naturally, any continued recovery in spot prices will directly actual price and profit rate growth. Therefore, Citigroup's industry-level forecasts are an important bullish factor for the stock. Furthermore, the drastic fluctuations in the prosperity of the lithium industry are vividly reflected in theme-based exchange-traded funds (ETFs). Against the backdrop of nearly doubling lithium prices over the past year, the Amplify Lithium Battery and Battery Technology ETF (BATT) achieved an astonishing return of 71% in the past 12 months, far exceeding the 20% performance of the S&P 500 index during the same period. However, with the recent temporary drawback in lithium spot prices, BATT quickly retraced 15% of its gains in the past month. Essentially, BATT is a leveraged bet on a single commodity lithium packaged into a thematic investment portfolio. The successful strategy of the past twelve months has depended on lithium prices remaining around $20 per kilogram. It is almost impossible for BESS prices to replicate a 71% increase from the current base. The core issue in the future is: will lithium spot prices stay around $22 per kilogram, fall back to around $10, or slowly rise to the historical average of $30 with the absorption of BESS demand? This variable will determine the future trajectory of BATT prices and lithium mining stocks.