The 200,000 yuan lithium price assumption is back: Energy storage pushes supply and demand toward a gap in 2026.

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The dual impact of explosive growth in energy storage demand and tightened supply constraints is pushing lithium price forecasts back to the high levels seen two years ago. According to information from Chasing Wind Trading Desk, UBS Global Commodities Team released its latest report on May 7, raising its 2026 forecast for China's spot lithium carbonate average price by 18% to 200,000 yuan/ton (including VAT), and predicts that spot prices may reach 250,000 yuan/ton in May to June.

On the demand side, UBS expects global lithium demand in 2026 to grow 16% year-on-year to 1.97 million tons of lithium carbonate equivalent (LCE), with energy storage battery (ESS) demand growth as high as 60%, becoming the core driver of this forecast revision. On the supply side, UBS’s risk-weighted supply forecast is only up about 13% to 1.91 million tons LCE (including recycled supply), creating a supply-demand gap of about 65,000 tons LCE.

The establishment of the supply-demand gap has directly led to a significant revision of individual stock profit forecasts. UBS raised its 2026 earnings forecasts for covered Chinese lithium stocks by 10% to 40%, which is 56% to 211% above market consensus; at the same time, raising target prices for Ganfeng Lithium A/H shares, Tianqi Lithium, and Qinghai Salt Lake, maintaining a "buy" rating on all covered stocks.

It is worth noting that UBS believes the implicit lithium carbonate price reflected by current Chinese lithium stocks is about 170,000 yuan/ton (including VAT), while SMM data on May 7 shows spot quotes have reached 190,500 yuan/ton. This pricing gap means that if the lithium price forecast materializes, there is significant revaluation potential for related stocks.

Energy Storage Demand Soars 60%, Becomes Core Logic of Price Upward Adjustment

The core drivers of this upward adjustment point to three aspects: firstly, UBS’s outlook for global energy storage (BESS) demand continues to become more positive; secondly, conflict in the Middle East is driving up energy prices, which in turn stimulates demand for electric vehicles (EV); thirdly, demand for electric heavy trucks in China is rapidly expanding.

In the base case, UBS forecasts that global lithium demand in 2026 will increase by 16% year-on-year to 1.97 million tons LCE. Among them, EV battery demand (accounting for 53% of the total) will grow 12% YoY; energy storage battery demand (17% of total) will grow 60% YoY, far outpacing EV growth.

UBS also points out that direct lithium demand calculated from cathode materials and electrolyte production may be higher than lithium demand implied by end markets (EV and energy storage installation). Behind this difference is accelerated BESS and EV/heavy electric truck demand driven by rising energy prices, as well as advance stocking needs in the supply chain ahead of battery product export tax rebate policy withdrawal.

In the upside scenario, UBS assumes ESS demand grows 80% YoY, pushing global lithium demand to 2.04 million tons LCE, with a supply gap of 123,000 tons LCE, corresponding to a lithium carbonate average price of 250,000 yuan/ton.

Supply Below Market Consensus, Zimbabwe Ban Aggravates Shortage

On the supply side, UBS’s forecasts remain significantly below market consensus. UBS’s forecasted global lithium supply increment in 2026 is about 213,000 tons LCE, while the market consensus ranges between 300,000 and 400,000 tons LCE.

This forecast adjustment revised supply estimates in two directions, resulting in a net increase of 1%: on the one hand, due to Zimbabwe's ban on lithium concentrate exports from March to April 2026 and potential subsequent impacts, UBS lowers its supply forecast for the country by 18% (equal to about 2% of global supply); on the other hand, because some mining companies in Jiangxi province will complete their annual quota ahead of planned production halts at the end of May or early June, coupled with larger-than-expected spodumene supply expansion from Sichuan, UBS raises its forecast for China lithium supply by 16% (or 3% of global supply).

After these adjustments, UBS maintains its forecast for a 65,000-ton LCE global supply-demand gap in 2026. In the downside scenario, if CATL's Jianxiawo mine and other halted mines resume faster than anticipated, and new projects like Zijin Mining ramp up quickly, supply may produce a 198,000-ton LCE surplus, corresponding to an average lithium carbonate price of 130,000 yuan/ton.

Supply Chain Inventory Low, Demand Momentum Has Upside Potential

UBS believes that there is upside potential in current demand forecasts, with the core rationale being that inventory levels across the industry supply chain remain relatively low.

Data shows that projected production plans for cathode materials and electrolytes continue to exceed market expectations. From upstream lithium raw materials and chemicals, to midstream cathode materials, to downstream batteries, inventory across the entire supply chain is at a low level. If downstream EV and BESS supply chains do not actively destock, the current strong industry chain momentum could continue.

UBS further points out that this view implies a potential risk—if there is concentrated destocking downstream, demand momentum will be weakened. But with the dual support of restocking logic and energy storage demand, the chance of inventory being passively digested rather than actively reduced is higher in the short term.

Based on a higher lithium price assumption, UBS has significantly raised its earnings forecasts for Qinghai Salt Lake, Tianqi Lithium, and Ganfeng Lithium (both A and H shares), with 2026 net profit forecasts 56% to 211% above market consensus.

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The above content is from Chasing Wind Trading Desk.

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