China ESS and Battery Materials

Research evidence excerpt

China ESS and Battery Materials

Flash |

19 Jul 2026 17:45:57 ET │ 15 pages

Soft Sentiment vs Strong Reality; We Remain Bullish into 3Q

CITI'S TAKE

We spent a week in China and met with various corporate and industry

contacts on the ESS battery supply chain. Feedback was mixed: ESS,

Battery, and materials companies remain very bullish on 2H26E and 27E

demand outlook while some lithium traders are more cautious on 27E Jack Shang, CFAAC

price outlook. This trip confirmed that the underlying demand is still solid +852-2501-2441

despite weak investor sentiment. We maintain our view that there is likely jack.shang@citi.com

a rally in lithium price in Aug-Sep (Chinese LC price could touch Rmb250k

Pierre Lau, CFAAC vs 150k now) and there could be a destocking into 4Q26E. We are at a later

stage of the battery price upcycle which started 3Q25. Our sector top +852-2501-2716

pierre.lau@citi.com picks: Ganfeng, Yuneng, CATL.

Anna Wang

+852-2501-2739Why is the market sentiment so bearish - The recent weakness in shares along the

anna.d.wang@citi.com

battery chain reflects the very weak investor sentiment. We noticed that shares of

CATL tended to respond only to negative instead of positive news lately. This reflects Jimmy Feng

the lack of visibility into 27E despite battery demand had continuously beat +852-2501-7588

expectations in 2025 and 2026 year to date. jimmy.feng@citi.com

Cynthia Wu

+852-2868-7813

cynthia.d.wu@citi.com...battery demand growth could beat in 27E again - Although it is still early, our

supply chain discussions indicate strong production plans by battery makers in 27E

with tier-1 players planning 25-30% growth and tier-2 players planning 70+%

growth. This is in contrast to the very weak demand sentiment as investors are