Undervalued energy storage demand, JP Morgan admits misjudgment: upgrades ratings for TIANQI LITHIUM and GANFENGLITHIUM, and the resumption of mining by CATL is also insufficient to fill the gap

JP Morgan has reversed its bearish stance on the lithium industry and stated that it had previously underestimated the explosive demand in the energy storage market.

According to the Wind Trading Desk, JP Morgan has rarely acknowledged its previous misjudgment in its latest report on China's lithium industry and announced that it has upgraded the ratings of Tianqi Lithium and Ganfeng Lithium from "underweight" to "neutral."

This move marks a significant correction in JP Morgan's view of the lithium market fundamentals. JP Morgan stated that the core issue was the severe underestimation of the explosive demand in the energy storage (ESS) market. On the other hand, supply may continue to be tight, as the resumption of production at CATL's mines is insufficient to turn the tide.

JP Morgan expects that the global lithium market will still face a supply gap in 2025 and 2026. This judgment has forced the bank to significantly raise its lithium price forecast for 2026 from RMB 70,000/ton to 90,000/ton, an increase of nearly 30%.

Reflection and Acknowledgment: Energy Storage Demand is the Key Driver

In this rating adjustment, JP Morgan candidly reviewed its previous bearish stance. The report acknowledged that while factors such as the resumption of production at CATL's mines negatively impact supply-demand balance, the surge in energy storage demand is a stronger driver of stock prices, sufficient to reverse market expectations. The existing projects' resumption or expansion alone is far from enough to address the anticipated supply gap.

"We have thoroughly examined our previous 'underweight' rating and concluded that the surge in energy storage demand is a stronger driver of stock prices. Although the restart of CATL's mines negatively affects the supply-demand balance, more capacity ramp-up/restart may be needed to address the expected market shortage. Therefore, we are terminating our 'underweight' rating on Ganfeng Lithium A/H shares and Tianqi Lithium A/H shares, upgrading both to 'neutral.'"

The report pointed out that energy storage has become a core variable affecting lithium prices and battery manufacturers' profits. Since June of this year, energy storage batteries have accounted for more than a quarter of global battery production, and over 40% of lithium iron phosphate (LFP) battery production.

JP Morgan's battery analysts expect that with policy incentives and the continued deployment of grid-level projects, global energy storage battery shipments will grow by 30% year-on-year in 2026, reaching approximately 770 GWh. It is precisely considering the additional demand for 140,000 to 165,000 tons of lithium carbonate equivalent (LCE) brought by energy storage that JP Morgan has revised its mid-term supply-demand forecast for the lithium market from surplus to shortage.

CATL's Mine Resumption is Insufficient to Turn the Tide, Supply-Demand Gap Persists

Following the reclassification announcement issued by the Jiangxi Provincial Department of Natural Resources on November 6, 2025, market expectations for the gradual resumption of production at CATL's Jiangxi Jianxiawo mine are heating up. This mine has an annual production capacity of about 45,000 to 50,000 tons of LCE, which is expected to provide some relief to the current market tightness.

However, this is not enough to fill the huge supply gap. JP Morgan's report emphasizes:

Even when accounting for the production from the Ganxiawo mine in the model, investors generally expect the global lithium market to be in a state of shortage in 2025 and 2026. At the same time, Jiangxi Province has implemented a 7% annual royalty and resource tax on future lithium ore sales, which will also raise the cost curve for domestic lithium mica.

On the supply side, JP Morgan's recent supply forecast remains largely unchanged, but the predictions for 2029/2030 have increased by 2-3%. In Australia, the timeline for Wodgina Train 3 has been advanced, and LTR's processing capacity is expected to expand from 3 million tons to 4 million tons; in Chile, due to SQM's continued expansion, production forecasts have been raised. However, Brazil's Sigma expansion has been delayed by two years due to financing constraints.

As a result, JP Morgan has raised its lithium price forecast for the 2026 fiscal year from RMB 70,000/ton to RMB 90,000/ton. In terms of specific target prices, JP Morgan has raised the target price for Ganfeng Lithium's A-shares from RMB 30 to RMB 65, and for its H-shares from HKD 22 to HKD 48; the target price for Tianqi Lithium's A-shares has been raised from RMB 30 to RMB 54, and for its H-shares from HKD 28 to HKD 50