Imminent Supply-Demand Reversal in Lithium Market; Q4 Lithium Carbonate Price Peak May Touch RMB 250,000/ton

Overview

This report records feedback from a conference call between Goldman Sachs and an independent consulting firm for the Chinese lithium industry. The core conclusion is that the supply-demand landscape of the lithium market will reverse in 2026, with a trend highly similar to the cyclical bottom rebound seen in 2020/2021. As energy storage (ESS) demand explodes and surpasses electric vehicles (EVs) to become the main force, coupled with supply-side disruptions from mining license renewals in China and export policies in Africa, the market will tighten significantly in Q4 2026, and lithium carbonate prices are expected to rebound sharply.

Core views

Demand Side: Structural shift in growth engines. 2026 will be the year when energy storage (ESS) surpasses electric vehicles for the first time as the primary growth driver for lithium-ion batteries. Regarding EVs, the penetration rate of new energy vehicles in China has reached a high level, with sales growth in 2026 expected to slow to around 15%, with incremental growth relying more on increased battery capacity per vehicle and overseas demand. Meanwhile, ESS demand is driven by multiple factors including Chinese policy and improved economics, renewable energy absorption in developed markets, energy security in the Middle East and Latin America, and AI data center construction in North America. Its weaker seasonality will make the lithium demand curve smoother. Supply Side: Incremental supply lags behind demand, with frequent disruptions. Global lithium supply in 2026 is expected to be approximately 2.1 million tons LCE (a year-on-year increase of 400,000 tons), lower than the expected demand increment of about 500,000 tons. The production halt at mines in the Yichun region of China is mainly due to mining license conversion rather than environmental issues, with some large mines expected to resume production only in Q4. Africa, as the largest source of incremental supply (approx. 160,000 tons), faces bottlenecks from Zimbabwe's raw ore export restrictions and insufficient downstream conversion capacity, meaning actual supply may fall short of expectations. Price Outlook: Range-bound fluctuation followed by a surge in Q4. Prices will remain relatively under pressure in the first half of the year due to weak post-holiday demand and the arrival of imported ores. From August to September, downstream players will begin restocking to meet annual targets, making Q4 the tightest period for supply and demand throughout the year. The central range for lithium carbonate prices is expected to be around RMB 200,000/ton, with the Q4 peak potentially touching RMB 250,000/ton. However, since ESS customers are more price-sensitive, high prices above RMB 250,000/ton will be difficult to sustain long-term.

Analysis framework

The institution adopted an analytical framework combining historical cycle analogy with decomposition of marginal changes in supply and demand. First, it analogized the current macro background with the cyclical bottom of 2020/2021 to establish the tone of a price bottoming and rebound. Second, on the demand side, it keenly captured the structural shift from single-core EV drive to ESS dominance, noting that this smooths out seasonal fluctuations. Finally, on the supply side, it used bottom-up regional tracking to demonstrate that incremental supply cannot effectively cover incremental demand, thereby deriving the conclusion that the restocking cycle in Q4 will trigger a price surge.

Methodology notes

• Cycle & Prosperity FrameworkProsperity Inflection Point Analysis

  Cyclical Bottom Reversal and Historical Analogy

  The report compares the 2025/2026 lithium cycle with 2020/2021, arguing that once prices touch the industry cost curve, they face the end of the downward cycle. With demand recovery, the supply-demand balance and prices will encounter a reversal upward inflection point similar to 2021.

• Industry/Sector Analysis FrameworkSupply-demand framework

  Supply-Demand Increment Gap Analysis

  By comparing the expected demand increment with the supply increment in 2026, the report concludes that there is a substantive supply-demand gap that needs to be absorbed by inventory. This is the core pricing logic for judging tightening commodity prices and upward trends.

Key data

• Expected 2026 China NEV SalesApprox. 19 million unitsYoY growth of approx. 15%, slowing down from the 16.6 million units in 2025
• Expected 2026 Global Lithium SupplyApprox. 2.1 million tons LCEYear-on-year increase of approx. 400,000 tons
• Expected 2026 Global Lithium Demand IncrementApprox. 500,000 tonsDemand increment exceeds supply increment, with the gap absorbed by inventory
• Expected African Lithium Supply IncrementApprox. 160,000 tonsLargest source of incremental supply, but subject to uncertainty due to policy restrictions
• Lithium Carbonate Price Peak ForecastApprox. RMB 250,000/tonExpected to occur in Q4 2026; higher prices are difficult to sustain due to ESS customer sensitivity

Impact & implications

The report believes that the lithium market is undergoing a structural transformation from single EV drive to dual-wheel drive by energy storage and EVs, which weakens the seasonality of lithium demand and makes the long-term demand base more solid. For the industry chain, resource nationalism and export restriction policies in places like Africa are substantially delaying supply release. Leading enterprises with mature smelting capacity and compliant licenses will gain higher premiums and market share.

Risks

• Unexpected release of African supply: If African policy restrictions are relaxed or downstream conversion capacity construction is faster than expected, supply tightness may be alleviated.
• ESS demand falling short of expectations: If excessively high lithium carbonate prices impair the economics of energy storage projects, it may trigger ESS order cancellations or demand slowdowns.
• Early resumption of Chinese mine production: If the progress of license conversion in the Yichun region accelerates, early resumption of halted mines will increase market supply.

What to watch

• Progress of mining license conversion and actual resumption timelines for mines in the Yichun region of China.
• Implementation of lithium ore export policies in Africa (especially Zimbabwe) and progress in local lithium salt conversion capacity construction.
• Restocking intensity and order scheduling of downstream energy storage and battery enterprises from August to September.