The 200k yuan lithium price assumption has returned: energy storage will push supply and demand into a gap by 2026

Ask AI · Why has storage demand surged 60% year-over-year?

The explosive growth in storage demand combined with tightening supply constraints is pushing lithium price forecasts back to highs seen two years ago. According to the latest report released by UBS Global Commodities team on May 7, the forecast for China’s spot lithium carbonate price in 2026 has been raised by 18% to 200k yuan/ton (including VAT), and spot prices may reach 250k yuan/ton between May and June.

On the demand side, UBS expects global lithium demand in 2026 to grow 16% year-over-year to 1.97 million tons of lithium carbonate equivalent (LCE), with energy storage batteries (ESS) demand increasing by as much as 60%, becoming the core driver of this upward revision. On the supply side, UBS’s risk-weighted supply forecast is only about 13% higher at 1.91 million tons of LCE (including recycling), creating a supply-demand gap of approximately 65k tons of LCE.

The establishment of this supply-demand gap directly led to significant revisions in individual stock earnings forecasts. UBS has raised its 2026 earnings forecasts for its covered Chinese lithium companies by 10% to 40%, which is 56% to 211% higher than market consensus; simultaneously, target prices for Ganfeng Lithium A/H shares, Tianqi Lithium, and Qinghai Salt Lake Industry have been raised, with all covered stocks maintaining a “Buy” rating.

Notably, UBS believes that the implied lithium carbonate price embedded in Chinese lithium stocks is about 170k yuan/ton (including VAT), while SMM data as of May 7 shows spot prices have already reached 190.5k yuan/ton. This pricing gap suggests that if lithium price forecasts materialize, related stocks could see significant revaluation.

Storage demand jumps 60%, becoming the core logic for price upward adjustment

The main drivers behind this upward revision point to three aspects: first, UBS’s continued optimistic outlook on global energy storage (BESS) demand; second, the escalation of energy prices due to Middle East conflicts, which stimulates electric vehicle (EV) demand; third, the accelerated expansion of electric heavy trucks in China.

Under the baseline scenario, UBS forecasts global lithium demand in 2026 to grow 16% year-over-year to 1.97 million tons of LCE. Among these, EV battery demand (accounting for 53% of total demand) will grow 12% YoY; energy storage battery demand (accounting for 17%) will grow 60% YoY, far outpacing EV growth.

UBS also points out that direct lithium demand derived from cathode material and electrolyte production may be higher than the lithium demand implied by end-market (EV and storage installations). Behind this difference are the accelerated demand for BESS and electric trucks/electric heavy trucks driven by rising energy prices, as well as pre-stocking needs ahead of the phase-out of export rebate policies for battery products.

In the bullish scenario, UBS assumes ESS demand will grow 80% YoY, with global lithium demand rising to 2.04 million tons of LCE, and the supply-demand gap expanding to 123k tons of LCE, with the average price of lithium carbonate reaching 250k yuan/ton.

Supply below market consensus, Zimbabwe ban worsens shortages

On the supply side, UBS’s forecast remains significantly below market consensus. UBS’s 2026 global lithium supply increase forecast is about 213k tons of LCE, while the market consensus ranges from 300k to 400k tons of LCE.

The recent adjustments revise the supply forecast in two directions, resulting in a slight overall increase of 1%: on one hand, due to Zimbabwe’s lithium concentrate export ban implemented from March to April 2026 and potential subsequent impacts, UBS has lowered the country’s lithium supply forecast by 18% (equivalent to 2% of global supply); on the other hand, because some mines in Jiangxi are expected to complete their annual mining quotas ahead of shutdowns at the end of May or early June, and with Sichuan spodumene supply expanding beyond previous expectations, UBS has raised China’s lithium supply forecast by 16% (equivalent to 3% of global supply).

After these adjustments, UBS maintains its view that the global supply-demand gap in 2026 will be 65k tons of LCE. In the bullish scenario, if restart speeds of mines like CATL’s Woniu mine are faster than expected, combined with accelerated ramp-up of new projects like Zijin Mining, supply could produce a surplus of 198k tons of LCE, corresponding to an average lithium carbonate price of 130k yuan/ton.

Supply chain inventories are low, demand momentum has upward potential

UBS believes that there is room for upward revision in demand forecasts, mainly because inventories across all segments of the industry chain are relatively low.

Data shows that planned production of cathode materials and electrolytes has consistently exceeded market expectations. From upstream lithium raw materials and chemicals to midstream cathode materials and downstream batteries, the entire supply chain’s inventories remain low. If downstream EV and BESS supply chains do not actively de-stock, the current strong industry momentum could persist.

UBS further notes that this assessment carries potential risks — if downstream sectors undergo concentrated de-stocking, demand momentum could weaken. However, under the current pre-stocking logic and support from energy storage demand, the higher probability is that inventories will be absorbed gradually rather than actively de-stocked in the short term.

Based on higher lithium price assumptions, UBS has sharply raised earnings forecasts for Qinghai Salt Lake Industry, Tianqi Lithium, Ganfeng Lithium A-shares, and H-shares, with 2026 net profit forecasts exceeding market consensus by 56% to 211%.