Citi Confidently Bullish on Lithium Carbonate, Targeting RMB 250,000 Per Ton

Overview

This is Citi's outlook report on Chinese battery materials (focused on lithium) for June 2026. The core judgment is that since the second half of 2025, lithium and battery materials have 'emerged from a trough,' with demand continuously being realized and strengthening. Combined with periodic supply disruptions, the report remains bullish on lithium prices, expecting lithium carbonate to test the key level of RMB 250,000 per ton within the year (likely during the traditional peak season of new energy vehicles in August-September plus export rush periods). Based on this, the report upgraded lithium's relative preference in the entire battery value chain, arguing that lithium-related stocks will outperform other segments during a price rally. It also maintains Buy ratings for Ganfeng Lithium and Tianqi Lithium's A/H shares while raising target prices.

Core views

Price forecast: Despite lithium prices touching RMB 200,000 per ton in the previous two weeks before retreating, the report still believes prices could further test RMB 250,000 per ton within the year. The rationale is that August-September represents the traditional peak season for new energy vehicles, compounded by an export rush period. Major battery manufacturers are expected to release new capacities during this time to meet annual production targets, resulting in a significant increase in stage-specific demand. The report argues that fundamentals remain solid, supporting another upward price momentum. Citi's commodities team also expects lithium prices to remain high under tight fundamentals. Demand side: Channel research (ZE Consulting) shows that battery production remains strong for the year, alleviating prior concerns—first, that FY26 new energy vehicle demand might be weaker than expected, and second, that rising raw material costs could suppress highly cost-sensitive energy storage (ESS) demand. Data indicates that in the first four months (4M), battery production increased by 41% YoY to 874 GWh, with new energy vehicle batteries up 22% YoY to 567 GWh and energy storage batteries up 99% YoY to 307 GWh. New energy vehicle demand demonstrates resilience, primarily driven by stronger-than-expected exports and an increasing share of commercial vehicles (which have significantly higher single-vehicle electricity capacity compared to passenger vehicles): In Q1 2026, China's electric vehicle installations grew by 18% YoY to approximately 176 GWh, with commercial vehicle installations growing by 109% YoY to 39 GWh, increasing their share to 22% (compared to 16% in 2025 and 9% in 2024). Supply side: The report details various supply factors with both positive and negative impacts. On the downside: JXW has been shut down since August 2025 due to expired mining licenses, improper permits, and environmental issues. CATL obtained the mining license at the beginning of 2026 but is still awaiting environmental approval, with the restart timing dependent on government processes, creating a hanging disruption to lithium prices. High-cost Australian spodumene mines are gradually incentivized to restart or expand starting in the second half of 2026 due to attractive prices. On the upside: Four lepidolite mines may face similar processes involving mining licenses and environmental approvals during the year. Companies are accelerating production to stockpile lepidolite inventory. If they halt operations to update permits, the monthly impact would be approximately -8kt LCE (accounting for 7-8% of China's lithium supply), though the actual impact this year may be less than expected but depends on approval progress for FY27 and beyond. Zimbabwe imposed a three-month export restriction starting February 2026, which was lifted at the end of April. Shipments are expected to arrive in ports by late June/early July, alleviating spot shortages, but a 10% export tax based on revenue will increase conversion costs for lithium salts. Individual stock views: The report maintains Buy ratings for Ganfeng and Tianqi, believing both will benefit from their cost advantages and economies of scale during the lithium price rally. Tianqi's A-shares have been catching up due to relatively low valuations, presenting short-term trading opportunities. However, the report prefers Ganfeng over the long term as it enjoys dual tailwinds from increasing attributable lithium carbonate production (Goulamina, Cauchari, PPG, Mt Marion, etc.) and higher average selling prices during the uptrend cycle, whereas Tianqi's growth potential is limited over the next 2-3 years. Profit forecasts: Ganfeng's FY26/27 attributable net profit was raised to RMB 8.457 billion and RMB 8.161 billion, respectively; Tianqi's was raised to RMB 6.969 billion and RMB 5.269 billion, assuming average lithium carbonate prices of RMB 175,000 per ton and lithium concentrate prices of USD 2,300 per ton in FY26, and RMB 160,000 per ton and USD 2,050 per ton in FY27.

Analysis framework

The report follows the analytical framework of 'demand verification + supply disturbance tracking + price forecast → individual stock profits and valuation'. Step one verifies demand using third-party channel research and high-frequency data: Through monthly data on battery production, installed capacity, changes in energy storage and commercial vehicle structures, the report proves that demand is strong and resilient, thereby supporting the bullish logic driven by demand. Step two tracks supply-side events: Each item of production resumption/expansion/export policy is marked as either 'positive' or 'negative' for lithium prices, with corresponding quantities (e.g., lepidolite -8kt LCE/month, accounting for 7-8% of China's supply) and time windows assessed to determine price risks. Step three transmits price assumptions into company profits: Through sensitivity analysis tables for average lithium salt prices and lithium concentrate prices, the report demonstrates how net profits change with these two variables, then adjusts FY26-28 profit forecasts accordingly. Step four focuses on valuation: Using the expected price-to-book ratio (P/B) for 2026 anchored at the historical 5-year average to price, and converting H-share target prices based on the historical average discount to A-shares (about 30% for Ganfeng, about 25% for Tianqi), ensuring comparability between A/H shares and peers.

Methodology notes

• Industry/Industrial Analysis FrameworkSupply-demand framework

  For upstream cyclical products like lithium, prices are dominated by supply-demand gaps, with demand verified through production/installation data and supply tracked via mine restarts/expansions/policy disruptions

  The report breaks down lithium prices into 'demand strength' and 'supply disturbances' separately argued: Demand is verified using battery production and installation data, while supply is tracked item-by-item regarding mine restarts, expansions, and export policies. Readers can understand that turning points for such resources often result from marginal changes in supply rather than solely downstream prosperity.

• Industry/Industrial Analysis FrameworkUpstream-Midstream-Downstream Value Chain Transmission

  Battery value chain preferences ranked as 'lithium > cathode > battery > electrolyte > separator > battery components > anode'; profits concentrate upstream during price increases

  The report ranks preferences across value chain segments to explain that when raw materials (lithium) increase in price, upstream segments with stronger pricing power enjoy more price benefits. This explains why it 'upgrades lithium preferences' during price rallies, believing lithium-related stocks will outperform other segments in the value chain.

• Industry/Industrial Analysis FrameworkVolume-Price Breakdown

  Sensitivity analysis using average lithium carbonate prices (ASP) and lithium concentrate prices to infer company net profits

  The report uses a sensitivity matrix to show how net profits change with simultaneous variations in 'lithium salt selling price' and 'lithium concentrate cost price', essentially breaking down company profits into 'volume × price × cost'. Readers can see that differences in price assumptions for the same lithium sales volume can lead to profit differences of several times, thus understanding the high sensitivity of profit forecasts to prices.

• Valuation MethodPB valuation

  Using 2026 expected price-to-book ratio (P/B) anchored at the historical 5-year average for pricing, e.g., Ganfeng 3.2x, Tianqi 2.5x

  For asset-heavy companies with profits fluctuating significantly with cycles, the report selects P/B instead of a single P/E to anchor valuation, setting multiples near the historical 5-year average to reflect the 'tight supply-demand' cycle position. This is a method of 'anchoring valuation at historical valuation centers' that reduces valuation biases caused by distorted net profits during low-cycle periods.

• Valuation Method

  A/H Discount Method: H-shares priced at historical average discounts to A-shares (Ganfeng ~30%, Tianqi ~25%) to convert target prices

  For companies listed in both A and H shares, H-shares trade at a long-term discount relative to A-shares. The report uses 'historical average discount rates' to convert A-share target prices into H-share target prices, ensuring consistency in valuation approaches between the two markets. Readers can understand that the difference between A/H target prices mainly stems from this habitual discount rather than fundamental differences.

• Cycle & Prosperity FrameworkProsperity Turning Point Analysis

  Judging that the lithium industry entered an upcycle ('out of the trough') in the second half of 2025

  The report emphasizes that the industry has passed the price bottom, with demand driving prosperity recovery, and builds individual stock logics on the 'upcycle.' This reminds readers that for cyclical goods, judging the current phase of the cycle (bottom, recovery, or top) is often more critical than simply looking at absolute valuations.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Ganfeng Lithium (002460.SZ / 1772.HK)

  Direct beneficiary of rising lithium prices; the report's long-term top pick enjoying dual tailwinds of attributable lithium carbonate volume growth and ASP increases

  Strengths

  Attributable lithium volumes expected to grow consistently over the next 2-3 years (Goulamina, Cauchari, PPG, Mt Marion, etc.); improved cost competitiveness from low-cost upstream resources; rapid development of battery business capable of largely offsetting raw material (lithium, copper, aluminum, etc.) cost increases, providing additional profit support

  Weaknesses

  The report does not highlight weaknesses, focusing instead on its long-term competitiveness

  Comparison

  Compared to Tianqi, Ganfeng has clearer future growth potential and is preferred long-term; however, its current A-share valuation (2.6x 2026E P/B, 17.3x PE) is higher than Tianqi

  Risks

  Geopolitical risks associated with overseas mining assets; lower-than-expected lithium battery demand; slower-than-expected ramp-up of Goulamina and Mariana

• Tianqi Lithium (002466.SZ / 9696.HK)

  Pure-play lithium business benefiting across the value chain from rising lithium prices during the upcycle; considered a short-term catch-up/trading opportunity due to relatively low valuation

  Strengths

  Pure exposure to the lithium sector; controls the world's largest and highest-grade (Li2O 1.3%) Greenbushes spodumene mine through Talison (holding 26.01%), securing low-cost resources; Q1 2026 profits showed meaningful recovery; lower valuation compared to Ganfeng, attracting investors

  Weaknesses

  Limited production growth over the next 2-3 years, weaker long-term growth elasticity compared to Ganfeng

  Comparison

  Tianqi has a lower valuation (A-shares 2.0x P/B, 16.4x PE; H-shares 1.4x P/B, 11.1x PE), offering short-term trading appeal; however, its long-term growth potential lags behind Ganfeng, leading the report to prefer Ganfeng long-term

  Risks

  Tianqi A-shares: Weaker-than-expected lithium battery demand; supply disruptions due to policy uncertainties; Tianqi H-shares: Dilution of SQM holdings due to the merger of SQM and Codelco; weaker-than-expected battery demand; unexpected production cuts at Greenbushes

• CATL A (300750.SZ), Hunan Yurenlith Energy (301358.SZ), EVE Energy (300014.SZ), CALB (3931.HK)

  Included in the report's 'top picks' list, benefiting from improved battery chain demand and sentiment

  Strengths

  -

  Weaknesses

  -

  Comparison

  The report lists them among its top picks but does not provide detailed individual stock analysis in this report

  Risks

  -

Key data

• Target Price for Lithium CarbonateRMB 250,000 per ton (may be tested within the year, around August-September)Recently touched RMB 200,000 per ton before retracing, but the report believes fundamentals still support further gains.
• Battery Production in the First Four Months (4M)874 GWh, up 41% YoYAmong which, new energy vehicle batteries +22% YoY to 567 GWh, energy storage batteries +99% YoY to 307 GWh.
• China EV Battery Installations in Q1 2026Approximately 176 GWh, up 18% YoYCommercial vehicle installations +109% YoY to 39 GWh, share increased to 22% (16% in 2025, 9% in 2024).
• Potential Impact of Lepidolite Mine ShutdownsApproximately -8kt LCE per monthAccounting for 7-8% of China's lithium supply; actual impact within the year may be smaller, with FY27 and beyond depending on approval progress.
• Zimbabwe Export Tax10% tax based on revenueExport restrictions for about three months starting in February ended in late April, shipments expected to arrive in ports by late June/early July.
• Ganfeng Lithium FY26/27 Attributable Net Profit (After Adjustment)RMB 8.457 billion / RMB 8.161 billionFY26 assumes average lithium carbonate price of RMB 175,000 per ton, lithium concentrate at USD 2,300 per ton; FY27 at RMB 160,000 per ton, USD 2,050 per ton.
• Tianqi Lithium FY26/27 Attributable Net Profit (After Adjustment)RMB 6.969 billion / RMB 5.269 billionSame price assumptions.
• Ganfeng Lithium Target Price / ValuationA-shares RMB 93, H-shares HKD 78.12Based on 3.2x 2026E P/B (5-year historical average), implying about 22x PE; current 2.6x P/B, 17.3x PE.
• Tianqi Lithium Target Price / ValuationA-shares RMB 75.14, H-shares HKD 68Based on 2.5x 2026E P/B (5-year historical average), implying about 18x PE; current 2.0x P/B, 16.4x PE.

Impact & implications

The report argues that rising lithium prices themselves reflect stronger demand, which is beneficial for the sentiment of the entire battery value chain's stock prices. Within the value chain, the upstream lithium segment benefits most from price increases, so its relative preference is upgraded. For individual stocks, both Ganfeng and Tianqi are expected to benefit from average selling price increases, but their logics differ slightly: Tianqi offers short-term catch-up and trading opportunities due to relatively low valuations, while Ganfeng is viewed as the preferred choice for the long term due to its dual tailwinds of attributable lithium volume growth and the upcycle. Overall, the report links lithium price signals to profit revisions and valuation anchoring, indicating that related lithium companies' profits and valuation centers have room for further improvement in a tight supply-demand environment.

Risks

• Ganfeng: Geopolitical risks associated with overseas mining assets; lower-than-expected lithium battery demand; slower-than-expected ramp-up of Goulamina and Mariana
• Tianqi A-shares: Lower-than-expected lithium battery demand; supply disruptions due to policy uncertainties
• Tianqi H-shares: Dilution of SQM holdings due to the SQM and Codelco merger; lower-than-expected battery demand; unexpected production cuts at Greenbushes
• Lithium Prices: Uncertainty regarding JXW's restart timing, resumption/expansion of high-cost Australian mines, which could pressure prices

What to watch

• Demand and lithium price trends during the new energy vehicle peak season and export rush window in August-September
• Approval process and restart timing for JXW's environmental permit
• Progress of mining licenses/environmental permits for four lepidolite mines and possible shutdown impacts (FY27 and beyond)
• Arrival rhythm of Zimbabwe spodumene shipments after export resumption and cost changes due to the 10% export tax
• Restart/expansion progress of high-cost Australian spodumene mines