29 Jan 2026 08:46:37 ET │ 9 pages China Battery Materials Flash | +852-2501-2739 anna.d.wang@citi.com Jimmy Feng +852-2501-7588 jimmy.feng@citi.com CITI'S TAKE YTD volatility of lithium is mainly attributable to the strong fundamental and liquidity momentum. Entering this week, we see fundamental remains resilient and lithium extends the destocking for another week (-783 tons last week, vs -1414 tons this week). However, tightening regulation & monitoring from GFEX puts pressure on the liquidity (i.e., chec ...

Summary of Lithium Market Analysis Industry Overview - The analysis focuses on the lithium market, particularly driven by the demand for Energy Storage Systems (ESS) and the impact of supply constraints in China [2][3][12]. Key Insights - **Lithium Price Trends**: Lithium carbonate prices in China surged from approximately $9,200 per ton in mid-September to over $11,000 per ton recently. This price increase is attributed to a tightening market balance due to stronger-than-expected ESS demand and temporary supply cuts from lepidolite mines in China [2][3][12]. - **Price Forecasts**: - For H1 2026, prices are expected to remain firm at $11,000 per ton, before dropping to $9,500 per ton in H2 2026. This is an upward revision from a previous average forecast of $8,900 per ton for 2026 [2][6][19]. - By 2027, prices are projected to stabilize around $9,250 per ton, with a potential need for supply cuts to prevent unsustainable inventory levels [2][19]. Demand Dynamics - **ESS Demand Growth**: The demand forecast for ESS lithium consumption has been significantly upgraded to 589 GWh in 2025 and 736 GWh in 2026, up from previous estimates of 275 GWh and 413 GWh, respectively. This indicates a material increase in underlying demand [12][15]. - **Global Lithium Demand**: Total lithium demand is expected to rise by 140,000 tons in 2025 and 209,000 tons in 2026, reflecting a 9% and 8% increase, respectively [15][19]. Supply Considerations - **Supply Growth**: Supply growth is anticipated to accelerate to 27% year-over-year in 2026, driven by the resumption of CATL's lepidolite operations and increased spodumene production. This is a significant increase compared to the 12% growth expected in 2025 [6][19]. - **Inventory Days**: Inventory days of demand cover are projected to fall to 61 days in 2025, down from 89 days previously forecasted. This indicates a tighter market balance [6][19]. Market Outlook - **Long-term Market Balance**: The lithium market is expected to remain in a low-for-longer phase relative to the highs of 2022/23, with supply projected to exceed demand by 18% in 2028 unless producers limit expansions [19]. - **Future Price Trajectory**: Prices are expected to stabilize within the lower end of the orderly regime range, with forecasts of $9,500 per ton in 2028 and $10,500 per ton in 2029, as the market transitions towards levels that support project advancements [19]. Risks and Considerations - **Upside Risks**: Potential upside risks to the price forecast include delays in the restart of lepidolite mines in China or stronger-than-expected ESS growth, which could tighten inventory cover and push prices higher [20][19]. Conclusion - The lithium market is currently experiencing a tightening phase driven by robust ESS demand and supply constraints. While prices are expected to remain high in the near term, long-term forecasts suggest a need for supply adjustments to maintain market balance.

Summary of the Conference Call on China Battery Materials Industry Overview - The conference call focused on the lithium battery materials industry, particularly in China, following CATL's mine closure which has implications for lithium supply and pricing dynamics [1][2]. Key Points and Arguments 1. **Supply Elasticity and Price Dynamics** - The halt in CATL's mine operations may lead to potential upside risks regarding supply elasticity in the lithium market. Increased lithium prices have prompted brine-based carbonate and spodumene OEM processing to enhance utilization rates [1]. 2. **Lithium Price Trends** - As of August 14, 2025, lithium carbonate (Li2CO3) and lithium hydroxide (LiOH) average selling prices (ASP) were reported at Rmb82k/t and Rmb73k/t, respectively, showing an increase from Rmb71.1k/t and Rmb65.5k/t the previous week [2]. 3. **Production and Inventory Levels** - China's Li2CO3 production increased by 2% week-over-week (WoW) to 19,980 tons. The production breakdown included a 12% decrease from lepidolite, a 4% increase from spodumene, and a 10% increase from recycling [2]. - Total inventory of Li2CO3 remained stable at 142,256 tons, with downstream players' inventory flat WoW at 48,283 tons, while smelters' inventory decreased by 3% to 49,693 tons [2]. 4. **Downstream Stockpiling Behavior** - Downstream players, particularly cathode manufacturers, are more inclined to stockpile lithium inventory due to the high price levels, which have been above Rmb80k/t recently. This behavior indicates resilience in apparent consumption, which has also increased by 2% WoW [1][2]. Additional Important Insights - The lepidolite inventory held by CATL is identified as a critical swing factor in the near term, influencing market dynamics and pricing strategies [1]. - The overall inventory levels have remained relatively flat, suggesting a balance between production and consumption in the current market environment [2]. This summary encapsulates the essential insights from the conference call regarding the lithium battery materials industry, highlighting production trends, pricing dynamics, and inventory behaviors that could impact future investment decisions.

Summary of Key Points from the Conference Call Industry Overview - The conference call focuses on the **Lithium market** within the **China Specialty Chemicals** industry, particularly regarding lepidolite mining and its implications for lithium supply and pricing. Core Insights and Arguments 1. **Lepidolite Mine Closures**: - Market sentiment is shifting towards the expectation of lepidolite mine closures in China due to regulatory changes. The Yichun government has requested local miners to re-submit mining documentation by September 30, 2025, which may lead to a need for new permits from the Central government under the new Mineral Resources Law effective July 1, 2024 [1] 2. **Impact on Lithium Supply**: - Lepidolite contributed 154,000 tons (kt) and 98kt of carbonate in 2024 and the first half of 2025, respectively, accounting for approximately 23% of the domestic carbonate market. If closures occur, the lithium market is expected to rebalance, potentially driving prices for lithium and spodumene upward [1] 3. **Lithium Pricing Trends**: - As of July 25, 2025, the average selling prices (ASP) for lithium carbonate (Li2CO3) and lithium hydroxide (LiOH) increased to Rmb72,900 per ton and Rmb63,100 per ton, respectively, compared to Rmb63,700 per ton and Rmb57,400 per ton on July 10, 2025. This indicates a significant price increase over a two-week period [2] 4. **Production and Inventory Changes**: - Lithium carbonate production in China decreased by 3% week-over-week to 18,630 tons. Specifically, production from lepidolite fell by 13%, while brine and recycled lithium saw minor declines. Total inventory of Li2CO3 remained stable at 143,170 tons, with downstream players' inventories increasing by 4% [2] Additional Important Information - **Regulatory Environment**: The new Mineral Resources Law may impose stricter regulations on mining operations, which could affect the supply chain and pricing dynamics in the lithium market [1] - **Market Dynamics**: The anticipated mine closures and regulatory changes could lead to a tighter supply of lithium, which is critical for battery production and electric vehicle manufacturing, thereby influencing broader market trends [1][2] This summary encapsulates the critical insights from the conference call regarding the lithium market, particularly focusing on the implications of regulatory changes and market dynamics in China.

Investment Rating - The report maintains a cautious view on lithium in the near term due to the ongoing downtrend in lithium prices and inventory buildup [1]. Core Insights - Lithium carbonate and lithium hydroxide average selling prices (ASP) decreased by 4% and 2% week-over-week (WoW) respectively as of May 8, 2025 [2]. - Lithium production in China is projected to increase by 2% month-over-month (MoM) and 21% year-over-year (YoY) to approximately 75,500 tons in May 2025, which is lower than the growth rates of downstream cathode and battery production [1][2]. - The total inventory of lithium carbonate is around 130,000 tons, contributing to downward pressure on ASP due to increased imports from low-cost brine regions [1]. Summary by Sections Lithium Prices - As of May 8, 2025, the ASP for lithium carbonate is quoted at Rmb62,300 per ton and for lithium hydroxide at Rmb66,500 per ton, down from Rmb68,000 and Rmb67,600 respectively on April 30, 2025 [2]. Production Data - China's lithium carbonate production increased by 27% WoW to 18,349 tons last week, with significant contributions from brine, lepidolite, spodumene, and recycling processes [2]. - The production output variations are attributed to the differing day counts during the Labor Holiday, affecting the weekly production figures [2]. Inventory Levels - The total inventory of lithium carbonate stands at 131,569 tons, with downstream players' inventory decreasing by 7%, while smelters' inventory increased by 7% [2].