A surge in energy-storage demand, a bold Ganfeng forecast and a brutal short squeeze are reshaping the lithium trade
Lithium is back in the spotlight, and this time the move is coming from the supply side’s most influential voice. Ganfeng Lithium chairman Li Liangbin told an industry conference that lithium prices could double next year as demand for energy-storage systems booms.
That one comment did what months of cautious broker forecasts and patchy spot-price prints couldn’t: It lit a fire under global lithium markets and forced short sellers into a scramble.
Prices Spike, Futures Markets Hit Their Limits
Li’s comments, suggesting demand could jump 30% in 2026, with prices climbing toward 200,000 yuan/t (~A$43,000/t), sent the most-traded carbonate contract on the Guangzhou Futures Exchange up 9%, hitting its daily limit.
Spodumene, Australia’s main lithium export, lifted 3.4% to US$1,075/t, according to Platts. The reaction in equities was even sharper.
- SQM jumped as much as 14%.
- Albemarle climbed nearly 10%.
- PLS and Liontown were among the few stocks holding the ASX 200 in the green.
This spike landed right as global markets were selling off, which only amplified the contrast: lithium equity momentum is no longer following the broader tape, its following fundamentals, demand signals and short-covered mechanics.
Why This Rally Has Real Foundations
Over the past six months lithium stocks have staged a powerful rebound. That recovery wasn’t bult on hype, it was built on a structural shift in demand: energy-storage systems (ESS).
Battery storage is emerging as a second demand pillar alongside electric vehicles. ESS demand is rising because grids need stability and data-centre power loads (driven by AI infrastructure) are surging.
This change in energy storage demand has put a rocket under the entire sector
Sam Berridge, Perennial
And this time, the rally isn’t happening in a vacuum, its occurring while short interest was near extreme levels.
Short Sellers Caught Wrong-Footed
PLS, the most shorted stock on the ASX, had short interest as high as 18.5% only two months ago. It now sits near 14%, reflecting a painful unwind. When prices rose and Ganfeng added a bullish outlook, shorts were forced to buy back stock, fuelling a technical rally on top of the fundamental one.
Some fund managers saw this coming and positioned early. DNR Capital bought into PLS and Liontown earlier this year, betting on ESS demand and the eventual clearing on the oversupply built during the 2021-2022 boom. Their call is being validated as suppliers cut production, projects are paused and capital expenditure plans are shelved.
Broker Upgrades Are Reinforcing The Trend
In the last two weeks alone:
- Barrenjoey upgraded its 2026 spodumene forecast to US$3,250/t – triple the current price.
- Citi and JPMorgan issued upgrades tied to stronger ESS and EV demand.
- Morgan Stanley reported China EV sales up 32% YoY to a record 1.1m units in October.
After a year of bearish revisions, the broker community has turned sharply more optimistic.
Risks haven’t disappeared – the market may be ahead of itself
Macquarie warned clients that the potential restart of CATL’s Jianxiawo mine could spark a near-term correction. That project has been offline since August due to a permit lapse, and rumours of a restart have been circulating for weeks.
CATL has been told to pay 247m yuan for mining rights, suggesting the path to restart is clearing. Even so, Macquarie believes December is the earliest practical restart date, and February after Chinese New Year is a more realistic timeline.
Valuations are also running hot, Macquarie notes:
- PLS and MinRes trade at implied spodumene prices of US$1,300/t.
- Liontown implies US$1,500/t.
That’s well above spot at ~US$1,075/t and reflects high expectations that must be met.
We’re cautious because the stocks have run a bit hard.
David Franklyn, Argonaut
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Investor Takeaways
Lithium is exiting its “capex freeze” phase and entering a re-rating phase driven by three intertwined forces:
- Energy-storage demand is expanding faster than the EV cycle alone.
- Producers have spent two years cutting supply, setting up a tighter 2026-27 market.
- Short interest is unwinding, giving price action more upside torque.
The bullish case rests on the idea that supply discipline + accelerating ESS demand = a tighter market much sooner than consensus expected.
The cautious case focuses one:
- China supply restarts.
- Valuations decoupling from spot prices.
- The possibility of another temporary demand pause as global growth slows.
But the trend that matters most is this: lithium is no longer a one-theme commodity. The rise of ESS gives it a second structural growth engine. For investors, this means:
- Volatility will stay high.
- Pullbacks will likely be sharp but short-lived.
- Long-term supply constraints remain real.
- High-quality producers with strong balance sheets will continue to attract capital.
If Ganfeng’s forecast is even directionally right, 2026 could the the first year since the boom that the lithium market experiences a genuine supply-demand squeeze, and that changes the entire investment landscape.