JPMorgan has reversed its bearish stance on the lithium sector, acknowledging it previously underestimated the explosive demand in the energy storage market.

In its latest report on China's lithium industry, JPMorgan made a rare admission of its earlier misjudgment and upgraded its ratings for Tianqi Lithium and Ganfeng Lithium from "underweight" to "neutral." This marks a significant revision of the bank's outlook on the lithium market fundamentals, with JPMorgan stating that the core issue was its severe underestimation of the surging demand in the energy storage system (ESS) market. Meanwhile, supply is expected to remain tight, and the resumption of CATL's mine operations will not be enough to bridge the gap.

JPMorgan forecasts that the global lithium market will continue to face supply shortages in 2025 and 2026. This outlook has prompted the bank to raise its 2026 lithium price forecast from RMB 70,000 per ton to RMB 90,000 per ton—a nearly 30% increase.

**Reflection and Correction: Energy Storage Demand as the Key Driver** In its rating adjustment, JPMorgan candidly reviewed its previous bearish stance. The report acknowledges that while factors such as the resumption of CATL's mine operations negatively impact supply-demand balance, the surge in energy storage demand is a stronger driver of stock prices, sufficient to shift market expectations. For the anticipated supply gap, the restart or expansion of existing projects alone will not be enough.

"We have re-examined our previous 'underweight' rating and concluded that the surge in energy storage demand is a more powerful stock price driver. Although CATL's mine restart is negative for supply-demand balance, the projected market shortage may require additional capacity ramp-ups or restarts. As a result, we are terminating our 'underweight' ratings for Ganfeng Lithium's A/H shares and Tianqi Lithium's A/H shares, upgrading both to 'neutral,'" the report stated.

The report highlights that energy storage has become a core variable affecting lithium prices and battery manufacturers' profits. Since June this year, energy storage batteries have accounted for over 25% of global battery production and more than 40% of lithium iron phosphate (LFP) battery output.

JPMorgan's battery analysts project that, supported by policy incentives and continued deployment of grid-scale projects, global energy storage battery shipments will grow by 30% year-on-year in 2026, reaching approximately 770GWh. Factoring in the additional demand for 140,000–165,000 tons of lithium carbonate equivalent (LCE) from energy storage, JPMorgan has revised its mid-term supply-demand forecast for the lithium market from surplus to shortage.

**CATL Mine Resumption Insufficient to Reverse Supply-Demand Imbalance** Following the reclassification announcement by Jiangxi Province's Department of Natural Resources on November 6, 2025, market expectations are rising for the gradual resumption of production at CATL's Jianxiawo mine in Jiangxi. With an annual capacity of about 45,000–50,000 tons of LCE, the mine is expected to provide some relief to the current tight market conditions. However, this will not be enough to fill the substantial supply gap.

JPMorgan's report emphasizes: "Even with Jianxiawo's output factored into the model, investors widely anticipate that the global lithium market will remain in deficit in 2025 and 2026. Additionally, Jiangxi Province's imposition of a 7% annual royalty and resource tax on future lithium ore sales will raise the cost curve for domestic lepidolite."

On the supply side, JPMorgan's near-term supply forecasts remain largely unchanged, but projections for 2029/2030 have been increased by 2–3%. In Australia, the timeline for Wodgina Train 3 has been accelerated, and LTR's processing capacity is expected to expand from 3 million to 4 million tons. In Chile, production forecasts have been raised due to SQM's ongoing expansion. However, Brazil's Sigma expansion has been delayed by two years due to financing constraints.

Consequently, JPMorgan has raised its 2026 lithium price forecast from RMB 70,000 to RMB 90,000 per ton. For specific price targets, the bank has increased Ganfeng Lithium's A-share target from RMB 30 to RMB 65 and its H-share target from HKD 22 to HKD 48. Tianqi Lithium's A-share target has been raised from RMB 30 to RMB 54, and its H-share target from HKD 28 to HKD 50.