On September 11, the lithium battery concept rose strongly during the trading session, and at the midday close, the "lithium king" $TIANQI LITHIUM (09696.HK)$ surging more than 15%.$GANFENGLITHIUM (01772.HK)$ Sea has risen for 8 consecutive days, with the stock price rebounding by more than 32%.

In the futures market, the main lithium carbonate contract rose more than 7% at one point during the day's trading, reaching a high point in over a week. As of the time of writing, the increase has narrowed to 5.85%.

According to the latest research report released by GTJA, the release of new lithium carbonate capacity has been delayed, and it is expected that the lithium sector will enter an upward cycle no earlier than 2026. Among the ongoing projects, the expansion plans for two Sal de Vida projects have been adjusted to be completed sequentially, resulting in a slower construction pace. The construction work for the PPG Salt Lake project has not yet begun, and the production process has been postponed. Construction work for the Galaxy project has been suspended. Overall, there are signs of contraction in the current supply side, with a significant decline in capital expenditure in the lithium mining industry, which is expected to suppress the addition of supply in the next 2-3 years.

From the demand side, GTJA stated that the long-term demand for new energy continues to grow at a year-on-year rate of 15%-20%, with the rapid growth of lithium-ion battery demand playing a major role in supporting the demand for lithium carbonate. High-cost mines have begun to gradually reduce production, and with further price declines, some mines may even suspend production. In the context of a sustained boom in downstream industries, it is expected that the price of lithium carbonate will enter an upward cycle between 2026 and 2027, typically starting to rise 6-9 months ahead of commodity prices in the lithium sector.

In terms of the industry, according to data released by the China Association of Automobile Manufacturers (CAAM), in August, China's production and sales of new energy vehicles reached 1.092 million units and 1.1 million units respectively, with year-on-year growth of 29.6% and 30%, and new energy vehicles accounted for 44.8% of the total sales of new vehicles.

Dongguan Securities pointed out that with the arrival of the traditional peak season for automobile consumption in September, coupled with the recent policy of replacing old cars with new cars to raise the subsidy standards, it is expected that the demand for replacement in the stock market will continue to increase in the year, and the sales volume of new energy vehicles is expected to maintain a fast growth trend. In terms of the industry chain, the overall performance of the mid-year reports still faces pressure but has improved sequentially. In the past two weeks, the prices in the lithium battery industry chain have generally stabilized, and attention is now focused on the improvement in production capacity as the peak season approaches. In the medium term, under the guidance of industry regulation and the pressure of low prices, it is expected that outdated production capacity will be cleared at an accelerated rate, while the expansion pace of new production capacity will slow down, which will benefit the improvement of the utilization rate of high-quality production capacity. It is recommended to focus on leading companies in the materials sector that have strong support from the fundamentals and are experiencing marginal improvements in the battery sector, as well as segments in the industry chain that are benefiting from new battery technologies and increased demand.