China Securities Co., Ltd. has released a research report stating that the new lithium battery cycle is becoming increasingly defined, driven by the non-linear growth in energy storage demand. On the demand side, global lithium battery demand is projected to reach 3,065 GWh in 2026, a year-on-year increase of 33.7%, which will drive rapid growth in the demand for lithium battery electrolyte. Based on supply and demand dynamics, it is anticipated that 6F and Visteon will be in a tight balance by 2026, while the supply-demand relationship for other electrolyte segments is expected to improve. Simultaneously, solvent prices are also expected to return to reasonable levels. The firm is optimistic that the electrolyte industry chain, represented by 6F and Visteon, will undergo a profitability reshaping during this new lithium cycle, primarily recommending the 6F and Visteon segments. The main viewpoints from China Securities Co., Ltd. are as follows:
The fundamental logic of this cycle lies in the combined effect of increasing penetration rates of new energy power generation and declining costs of energy storage systems. The core drivers include policy Document No. 136 promoting the full integration of new energy into the market, widening peak-to-valley electricity price differentials, and policy Document No. 114 clarifying capacity电价 for energy storage, providing stable revenue expectations for energy storage.
Regarding demand, the forecast for 2026 includes electrolyte demand of 3.67 million tons, 6F demand of 404,000 tons, EC demand of 917,000 tons, EMC demand of 822,000 tons, DMC demand of 1.013 million tons, Visteon demand of 110,000 tons, and FEC demand of 44,000 tons.
On the supply side, estimates indicate that effective production capacity for 6F in 2025-2026 will be approximately 345,000/414,000 tons, for EC approximately 936,000/1.106 million tons, for DMC approximately 903,000/1.29 million tons, for EMC approximately 1.085 million/1.135 million tons, for Visteon approximately 79,000/114,000 tons, and for FEC approximately 40,000/57,000 tons.
Considering both supply and demand, 6F and Visteon are expected to be in a tight balance by 2026, with supply-demand conditions for other segments likely to improve. On a quarterly basis, 6F is expected to face a shortage in the second half of 2026, while Visteon will maintain a tight balance throughout the year. Other segments may see supply and demand tighten by the fourth quarter of 2026. Demand is expected to be relatively weak in the first quarter of 2026 due to seasonal factors, but as demand picks up in the second and third quarters, 6F and Visteon prices are expected to remain high. The solvent supply-demand relationship is anticipated to improve significantly, with solvent prices expected to recover to reasonable profitability levels.
The firm remains positive on the profitability reshaping of the electrolyte industry chain, led by 6F and Visteon, in the new lithium battery cycle, primarily recommending the 6F and Visteon segments.
Risk warnings include: 1) Downstream demand falling short of expectations: Sales could be impacted by weak end-demand; production volumes could be affected by significant fluctuations in upstream raw material prices, power restrictions, etc., subsequently impacting the shipment volumes and profitability of related company operations. 2) Raw material price fluctuations exceeding expectations: Since 2021, raw material prices have experienced significant periodic volatility. High price levels and instability can impact terminal demand and cause short-term fluctuations in company performance. 3) Delays in key projects of recommended companies: As participants in the new energy sector, the progress of key projects is crucial for supporting revenue and profits and reflects growth potential. Delays could impact both near-term and long-term performance. 4) Impacts from policy fluctuations: Currently, lithium batteries and materials account for about 80% of global supply. Changes in policies related to trade (e.g., tariffs, tax rebates), production (e.g., carbon emissions), and demand (e.g., subsidies) could alter supply-demand dynamics or profit distribution within the industry chain.