Lithium Carbonate Configuration Window or Early Entry | Chemical Sector Enters Repair Channel

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Securities Times Reporter Wang Xiaoqian

Against the backdrop of accelerating differentiation within the upstream resource sector, HuaFu Fund manager Deng Xiang further focuses his investment vision on lithium carbonate and the chemical industry.

Deng Xiang pointed out that the marginal changes in the current supply and demand pattern are reshaping the allocation logic of resource sectors. On one hand, the lithium resource expansion cycle is locked in, industry capital expenditure remains low, and energy storage demand is rapidly increasing after profit models become viable, making lithium carbonate temporarily supply tight. On the other hand, the growth rate of capital expenditure in the chemical sector has significantly slowed, industry cleanup is gradually completing, and the logic of supply-side recovery is entering a兑现 stage.

Lithium Carbonate Becomes a Core Allocation Focus

“By Q4 2025, HuaFu Strategy Select’s positions will be more concentrated in lithium carbonate.” When discussing product structure adjustments, Deng Xiang said this decision is not a short-term trading game but based on a systematic judgment of changes in supply and demand structures.

Previously, HuaFu Strategy Select maintained a relatively balanced allocation in upstream resources. But in Q3 2025, he noticed that supply-side lithium industry capital expenditure was entering a trough. The lithium resource expansion cycle generally exceeds two years, and at that time, industry capacity utilization was close to 80%. He believes that with demand maintaining a high growth rate, limited new supply in the next two years will make the supply-demand gap more certain.

The key variable on the demand side is energy storage. Deng Xiang believes that with the domestic cancellation of mandatory storage policies and the introduction of capacity electricity price compensation mechanisms, independent energy storage projects are gradually becoming profitable. After the promotion of electricity market reform, intraday price fluctuations have expanded, creating space for energy storage development. His research found that some operational projects have internal rates of return higher than market estimates, and the scale of projects under construction has also increased significantly.

“The market’s expectation of tightness for lithium carbonate in 2027 is already quite consistent, but we believe it may start to be reflected in 2026.” Deng Xiang said. In his view, the locking of supply and the acceleration of demand (especially energy storage) resonate, rapidly increasing the importance of lithium carbonate in its upstream resource allocation sequence, making it a key layout direction. Based on his judgment of industry prosperity from 2026 to 2027, he believes this period will be a critical observation and allocation window for the lithium carbonate sector.

Chemical Sector Enters Recovery Stage

Besides lithium carbonate, Deng Xiang’s other managed product—HuaFu Growth Enterprise Select Stocks—focuses on the chemical sector. He believes that compared to short-term demand fluctuations, the current chemical industry is more worth paying attention to for marginal changes on the supply side.

“The industry turning point signals are actually already evident in capital expenditure data,” Deng Xiang said. He reviewed the last cycle and analyzed that although 2021 was a peak for chemical product prices and stock prices, during the subsequent price decline, industry capital expenditure remained high, leading to supply pressure not being cleared in time. After 2025, the growth rate of capital expenditure has significantly slowed, with some sub-sectors even showing negative year-over-year growth, which he views as a sign that industry capacity cleanup is gradually completing.

He sees the current stage of the chemical sector as closer to the “initial phase of supply recovery.” On one hand, capacity淘汰 and profit pressure over the past years have promoted industry concentration; on the other hand, leading companies have completed structural optimization during low-profit periods, strengthening their resilience. As supply constraints gradually emerge, marginal demand improvements could accelerate profit elasticity.

“In the chemical industry, stock prices usually lead to actual product price increases,” Deng Xiang pointed out. He believes that if this cycle is centered on supply contraction, its duration could be longer. Compared to short-term trends relying on a single product, the sector’s recovery is more likely to be a trend-based修复—meaning, through orderly rotation across different sub-sectors within the industry, valuation and profitability can gradually rebalance.

Cautiously Approaching Left-Side Positioning

When explaining his investment methodology, Deng Xiang said that the core of cyclical investing is not about precisely “bottom-fishing,” but about keenly identifying and grasping substantial changes in industry supply and demand structures.

“I wouldn’t consider myself a typical left-side picker,” Deng Xiang said. His experience from multiple cycles has made him realize that relying solely on valuation or price levels for left-side positioning often requires enduring long periods of底部磨底 and uncertainty. Instead, he pays more attention to whether internal variables within the industry are enough to change the supply-demand pattern. Once such changes are established, even if stock prices have already risen, the trend may still be in its early stages.

This framework is also reflected in Deng Xiang’s position management. For sectors supported by medium- to long-term logic, he tends to increase focus and continuously track fundamentals on a quarterly basis; when prices deviate from reasonable ranges or trading becomes overly crowded, he adjusts positions dynamically to control drawdowns. “The key is whether the logic is intact, not short-term volatility,” he said.

From a macro perspective, he believes that global liquidity remains relatively loose, countries continue to emphasize resource security and energy systems, and the strategic importance of commodities is increasing. Against this backdrop, a new commodity cycle may exhibit structural characteristics, with different sub-sectors taking turns to perform at different stages.