Goldman Sachs downgraded Ganfeng Lithium's H-share rating to "Sell" and lowered the lithium price forecast for the second half of 2026 by 14%

Goldman Sachs downgraded Ganfeng Lithium's H-shares rating from Neutral to Sell, citing downward risks for lithium spot prices due to poor short-term feedback from the downstream market and a slowdown in inventory replenishment growth. This rating adjustment covers multiple Chinese lithium stocks and reflects the investment bank's concerns about the mid-term supply-demand balance in the lithium market.

The Goldman Sachs analyst team pointed out in their latest research report that although the fundamentals of the lithium market have significantly improved, the supply-demand balance is expected to remain tight in the first half of next year. However, the prolonged inventory cycle of energy storage systems may become a counteracting factor. The bank lowered its forecast for the benchmark spot price of lithium carbonate in China for the second half of 2025 to USD 9,500 per ton, a 14% decrease from previous expectations.

This pessimistic outlook prompted Goldman Sachs to significantly cut its earnings forecasts. The bank reduced its earnings estimates for Ganfeng Lithium for 2026-2027 by 36%-42% and expects a loss in 2025. Goldman Sachs also maintained a Sell rating on Ganfeng Lithium's A-shares and Tianqi Lithium's A-shares and H-shares.

Goldman Sachs set a target price of HKD 32 for Ganfeng Lithium's H-shares.

Slowing Growth in Energy Storage Demand Poses Pressure

The team led by Goldman Sachs analyst Trina Chen noted in the report that energy storage systems previously drove most of the changes in market expectations, becoming a key force supporting lithium demand. However, as incremental demand growth slows, the longer inventory cycle of energy storage systems may instead exert pressure on prices.

The bank predicts that global lithium production capacity will experience a 12% shortfall relative to demand in the second half of 2025, but will turn into a 10% surplus by the second half of 2026. This shift in the supply-demand landscape is expected to start exerting substantial pressure on lithium prices in the second half of next year.

Current Stock Prices Reflect High Price Expectations

Goldman Sachs pointed out that the current valuations of most Chinese lithium stocks have already absorbed a lithium price range of USD 16,200 to 24,500 per ton. This price range is significantly higher than the bank's forecast of USD 9,500 for the second half of next year, indicating a risk of valuation adjustments for the related stocks.

Based on the latest lithium price forecasts, Goldman Sachs adjusted Ganfeng Lithium's earnings outlook from positive profit to loss. This significant revision reflects the erosion effect of declining lithium prices on the profit margins of high-cost producers