According to the latest market data, the factors influencing the price increase of lithium batteries in China in 2026 present a complex pattern of tight supply and demand, policy catalysts, and cost transmission. Here is an analysis of key driving factors:

I. Soaring Prices of Core Raw Materials

1. Lithium Carbonate Prices Enter a New Round of Price Increases

Price Level: At the beginning of 2026, lithium carbonate futures prices had already exceeded 170,000 yuan/ton, an increase of over 50% compared to the beginning of the year.

Institutional Forecasts: UBS raised its 2026 average lithium carbonate price forecast by 26% to 170,000 yuan/ton, and expects it to rise to 200,000 yuan/ton in 2027.

Logic of the Price Increase: The market has entered the "third lithium price super cycle," driven by both tight supply and demand and resource scarcity.

2. Price Increases in Raw Materials Across the Entire Industry Chain

Prices of key materials such as lithium hexafluorophosphate and lithium hydroxide have risen simultaneously, driving up the prices of main materials such as cathode materials and electrolytes.

Tight Lithium Concentrate Supply: Major producing countries such as Zimbabwe have suspended lithium ore exports, exacerbating the global supply shortage.

II. Policy-Driven "Rush to Export" Effect

1. Export Tax Rebate Policy Adjustment

Tax Rebate Rate Reduction: From April 1, 2026, the VAT export tax rebate rate for battery products will be reduced from 9% to 6%, and will be completely eliminated from January 1, 2027.

Seizing the Export Window: To avoid policy changes, midstream and downstream enterprises accelerate production and deliver goods ahead of schedule, resulting in a short-term surge in demand.

2. Favorable Energy Storage Policies

Capacity-Based Pricing Mechanism: With the implementation of China's national capacity mechanism, the internal rate of return (IRR) for energy storage projects has increased to 8%-10%, and the payback period has been shortened to 6-8 years.

Upward Demand Draft: UBS has revised its global energy storage pipeline forecast for 2026-2030 from 1.8TWh to 1.9TWh, with China accounting for as much as 45%.

III. Explosive Growth in Demand

1. Energy storage demand becomes the biggest variable

Amazing growth: Lithium demand in the energy storage sector surged 71% in 2025, and is projected to grow by 55% in 2026.

First time surpassing power batteries: New energy storage installations are expected to reach 150-200 GWh in 2026, corresponding to an additional 250,000 tons of lithium carbonate demand, surpassing power batteries for the first time to become the largest source of demand.

2. Continued high growth in new energy vehicles

Production and sales data: In 2025, China's new energy vehicle production and sales reached 16.62 million and 16.49 million units respectively, representing year-on-year growth of 29% and 28%.

Demand share: New energy vehicles still account for 65% of total lithium ore demand, serving as the "ballast."

IV. Supply-side structural constraints

1. Inventory at historically low levels

Low inventory across the entire industry chain: Upstream lithium concentrate inventory is less than one month's supply, midstream lithium salt inventory is only about two weeks' supply, and downstream cathode material inventory is about one month's supply.

Low inventory amplifies price elasticity: The market is extremely sensitive to lithium prices; any supply and demand disturbances will trigger sharp price fluctuations.

2. Capacity release falls short of expectations

Compliance-related shutdowns: Environmental reviews at Jiangxi mica mine have rendered much of its capacity ineffective.

Project ramp-up delays: Globally, there's a significant time lag between new project commissioning and reaching full production capacity; actual increases are far lower than nominal capacity.

Hidden production cuts: UBS estimates a market expectation of 300,000-400,000 tons of supply increase in 2026, but the actual increase is only about 230,000 tons.

V. Supply Chain Transmission and Game

1. Price transmission gradually diminishes

Upstream strength: Rising raw material prices have been transmitted downstream along the supply chain, but the transmission effect diminishes gradually due to long-term contract pricing and end-user acceptance.

Midstream pressure: Battery manufacturers face the dilemma of "cost increases exceeding selling price increases," putting their profitability stability to the test.

2. The Struggle for Supply Chain Dominance

Intensified Upstream and Downstream Competition: A covert battle over profit distribution is underway, with companies deeply integrated with upstream resources and possessing differentiated technologies poised to build competitive barriers.

VI. Geopolitics and Resource Strategy

Overseas Supply Risks: Zimbabwe indefinitely suspends lithium ore exports; the Democratic Republic of Congo continues to experience cobalt raw material shortages.

Resource Nationalism: Stricter policies in resource-rich countries are prompting Chinese companies to adapt by building lithium salt plants overseas.

Escalating Energy Competition: Lithium, as the starting point of the new energy supply chain, has become a key element in global energy competition, with resource scarcity being pre-priced in.