CITIC Securities: The overall supply and demand pattern of the lithium battery industry is expected to see an upward trend in the second half of the year
Citic Securities' latest research report paints an optimistic picture of the lithium battery industry for the second half of 2026, highlighting "improving industry sentiment," "better supply-demand balance," and "rebounding prices." Brokerage reports are, of course, known for sketching out a rosy future during industry downturns—a well-worn script. However, this round of optimistic projections sounds almost laughable: are they once again sitting in their air-conditioned offices, tapping away at
Analysis
CITIC Securities sees a lithium-ion battery industry supercycle returning in the second half of 2026, driven by a perfect storm of recovering domestic demand in China and rising global oil prices. The prediction is classic brokerage bullishness, built on two pillars: an electric vehicle (EV) demand story that remains stubbornly tethered to the price of gasoline, and a storage boom that finally feels economically inevitable rather than state-subsidized. On the surface, the logic holds. But buried in this forecast are critical assumptions about geopolitics, technological readiness, and market maturity that deserve a much harder look.
The demand thesis, first. Tying EV momentum to high oil prices feels like a strategy with a short fuse. Yes, expensive petrol makes an EV’s total cost of ownership more compelling at the pump. But the real accelerant has been policy—subsidies, registration privileges, and manufacturing mandates. A rebound in oil prices might give the consumer push a little extra nudge, but it also signals a more volatile macroeconomic environment. If prices spike due to geopolitical conflict or supply shocks, they could just as easily strangle consumer spending on big-ticket items like new cars. The report seems to assume a smooth "Goldilocks" scenario where oil is high enough to motivate buyers but not so high that it crashes the broader economy. That’s a narrow needle to thread.
More importantly, the EV market is entering a phase of brutal competition and margin pressure, not just unadulterated growth. We’re past the era where any EV with four wheels finds a buyer. The next two years will be defined by a war of attrition, where only those with exceptional cost control, software differentiation, and manufacturing scale survive. Expect a bloodbath among the dozens of Chinese startups. The high-energy-density, high-margin cells that CITIC predicts will command "tech premiums" will be fought over by giants like CATL and BYD, who are already driving down costs through relentless innovation. The notion of a smooth, industry-wide "price stabilization and rebound" ignores the reality that for many mid-tier players, survival will depend on slashing prices, not raising them. The supply-side "improvement" might simply manifest as a wave of bankruptcies and asset sales, cleansing the market but causing immense pain along the way.
Then there’s the storage piece, which is the more interesting and perhaps more durable part of the equation. Here, the economic case is finally standing on its own feet. Revenue stacking—selling energy arbitrage, grid services, and backup power—is making projects bankable without relying solely on government mandates. This is a real shift. The global synchronization of demand is also plausible; Europe needs storage to manage renewable intermittency, the U.S. is spurred by the Inflation Reduction Act, and China is building storage to stabilize its grid. This is a genuine, multi-polar growth driver.
But the supply-side narrative for storage cells is concerning. The report focuses on high-end products and overseas capacity expansion as signs of healthy supply discipline. This masks a deeper problem: the race for scale is still prioritizing cost over durability and performance. Grid-scale storage has different failure modes than an EV battery. It needs to endure thousands of cycles over 15-20 years, not just survive a five-year car lease. The industry’s rush to gigafactories optimized for EV volumes might not be producing the right chemistry or quality for long-duration storage. We risk overbuilding capacity for one application while facing potential shortages or reliability issues for another.
The most glaring omission in the CITIC forecast is the elephant in the room: raw material volatility and the recycling imperative. The memory of the lithium carbonate price collapse from its 2022 highs to 2023 lows is still fresh. Producers are cautious, and financing for new mining projects is harder to secure after that boom-bust cycle. Assuming a smooth supply ramp-up to meet 2026 demand ignores this very real caution in the upstream market. Furthermore, as we build this massive installed base of batteries for both EVs and storage, the timeline for mass recycling and a true circular economy is lagging dangerously. We are planning an industry at scale while deferring its most critical sustainability challenge.
So, will the lithium-ion industry see a demand-driven uptick in 2026? Probably, at the top end of the market. Will it be the smooth, profitable rise that brokerage reports imply? I highly doubt it. The landscape will be characterized by fierce bifurcation. A handful of global leaders will capture the high-end, high-margin segments in both EVs and storage. A swarm of smaller players will engage in ruinous competition for the low-to-mid-range market, likely fueling overcapacity in certain chemistries like LFP. The "supply-demand improvement" will be a statistical average that hides massive turmoil underneath. The real story won’t be an industry-wide tide lifting all boats, but a Darwinian selection process where technological prowess, cost discipline, and access to capital decide who gets to survive. The forecast is a snapshot of the desired destination, but it glosses over the brutal, rocky path to get there.
Disclaimer: The above content is generated by AI and is for reference only.