Everbright Securities: Positive production cuts and price increases are expected to help lithium prices transfer energy storage demand expectations and improve the supply and demand pattern

The Zhitong Finance App learned that Everbright Securities released a research report saying that according to an analysis by Shanghai Nonferrous Metals Network (SMM), lithium iron phosphate companies have continued to negotiate price increases recently. Leading companies are now in the second round of negotiations, but most other material manufacturers have not yet implemented the first round of negotiations. At the same time, Tianqi Lithium's adjustment of the spot transaction settlement price model also demonstrated strong downstream demand. On the energy storage side, benefiting from changes such as the decline in the cost side, the widening of peak and valley price spreads after the publication of Document No. 136, and the introduction of capacity electricity prices/capacity compensation policies in some domestic provinces, domestic energy storage yields are expected to increase, thereby driving demand.

The main views of Everbright Securities are as follows:

Incident: On December 25, 2025, Hunan Yuneng, German Nano, and Wanrun Xinneng successively issued production reduction and maintenance notices for some production lines: Among them, Hunan Yuneng is expected to take 1 month to reduce cathode material products by 15,000 to 35,000 tons; Wanrun Xinneng is expected to take 1 month to reduce lithium iron phosphate production by 5,000 tons to 20,000 tons; and German Nano's estimated maintenance time is 1 month. At the same time, Tianqi Lithium issued an announcement letter. Due to a significant deviation between SMM prices and fair spot prices and futures prices, it will adjust the spot transaction settlement price and change it to the main contract price for lithium carbonate from Shanghai Steel Union or Guangji Institute.

Cathode materials manufacturers cut production and raised prices, and the rise in lithium prices is expected to be transmitted downward

According to an analysis by Shanghai Nonferrous Metals Network (SMM), recently lithium iron phosphate companies have continued to negotiate price increases with downstream battery cell manufacturers. The leading companies are now in the second round of negotiations, but most other material manufacturers have yet to complete the first round of negotiations. Downstream cell manufacturers as a whole are still accepting a trend of rising prices for cathode materials due to rising raw material prices, but we still need to wait further for the results of upstream and downstream negotiations to implement the actual price increase. If the price increase of cathode material manufacturers is implemented later, it will be more conducive to the transmission of lithium price increases downstream, opening up upward space. At the same time, Tianqi Lithium's adjustment of the spot transaction settlement price model also demonstrated strong downstream demand.

Downstream high-frequency data still supports the industry's high prosperity. Lithium carbonate stocks have been out of storage for 19 consecutive weeks

According to research data from Dadong Times Think Tank (TD) on the top 20 battery manufacturers in the industry, the total production schedule for China's lithium battery (energy storage+power+consumption) market in January 2026 was about 210 GWh, a decrease of 4.5% from the previous month, which is better than market expectations. According to SMM, the total weekly inventory of lithium carbonate on December 25, 2025 was 10,773 tons, or 652 tons month-on-month. This was 19 consecutive weeks of storage during this year, while the inventory value was at a new low value since February 20, 2025.

Demand for energy storage boosts expectations, and the supply and demand pattern is expected to improve in 2026

Benefiting from changes such as the decline in the cost side, the widening of peak and valley price spreads after the publication of Document No. 136, and the introduction of capacity electricity prices/capacity compensation policies in some domestic provinces, domestic energy storage yields are expected to increase, thereby driving demand. According to statistics from Xinyi Consulting, global shipments of lithium energy storage batteries in 2025 were 620 Gwh, an increase of 77% year on year. It is expected to reach 960 GWh in 2026, an increase of 54.8% year on year.

From the perspective of capital expenditure, the world's major lithium mining companies experienced an inflection point of decline in capital expenditure starting in 2024, and the supply growth rate for new projects or expansion projects is expected to slow down in 2026 and 2027. Electric vehicles with energy storage are expected to become the second growth curve for lithium demand, and the supply and demand pattern is expected to improve in 2026.

Long-term solid-state batteries, etc. provide new kinetic energy requirements for lithium

Solid-state batteries are seen as the next technology direction due to their high energy density and safety. According to Xinyi's information forecast, solid-state battery shipments will be about 5.1 GWh in 2025, reaching nearly 80 GWh in 2030, and a compound growth rate of 64% in 2025-2030; 456 GWh in 2035, a compound growth rate of 53% in 2025-2035. Among them, semi-solid state batteries have already entered mass production and shipment in 2024. Currently, all-solid-state batteries are mainly in the laboratory verification stage, and Gwh shipments are expected to begin in 2027. Many domestic companies have begun to actively deploy solid-state batteries. According to the Yabao announcement, the lithium consumption of all-solid-state batteries is expected to reach nearly 2 kg/kWh, double the current lithium battery system, and is expected to further boost lithium demand.

Investment advice

It is recommended to focus on Tianhua Xinneng (300390.SZ), Shengxin Lithium Energy (002240.SZ), Dazhong Mining (001203.SZ), Guocheng Mining (000688.SZ), Zangge Mining (000408.SZ), Salt Lake (000792.SZ), Yahua Group (002497.SZ), Ganfeng Lithium (002460.SZ), Tianqi Lithium (002466.SZ), etc.

Risk Alerts

Downstream demand falls short of expectations; new domestic and foreign policies and geopolitical uncertainties, etc.