The recent strong rebound in lithium carbonate prices has once again put energy storage in the spotlight. Since hitting bottom in June of this year, lithium carbonate prices have surged by over 36.9% in just over a month, returning to the break-even point of 80,000 yuan/ton by the end of July. Since then, lithium prices have fluctuated upward. As of the close of domestic futures trading on August 18, the 2509 lithium carbonate contract closed at 89,300 yuan/ton, up 4.86%. This shift in price trends has not only given lithium mining companies hope, but also seemingly ushered in a turnaround for energy storage projects stalled by cost pressures.
So, can rising lithium prices truly revive stalled energy storage projects?
Lithium's significant price fluctuations are fundamentally the result of an imbalance between supply and demand. Over the past few years, lithium carbonate prices have plummeted from 230,000 yuan/ton at the time of the 2023 listing of lithium carbonate futures to below 70,000 yuan/ton for the first time in April 2025. This continued price decline has mired the entire lithium battery industry chain in difficulties, with many lithium material suppliers suffering significant losses due to falling product prices. Tianqi Lithium, for example, has long been experiencing a "cost inversion." To cope with falling prices and overcapacity, lithium mining companies have implemented production cuts and suspensions. Overseas lithium mining companies such as Albemarle and Core Lithium, an Australian lithium miner, were the first to announce production halts, followed closely by domestic companies. China Mining Resources is upgrading its production lines, Jiangte Electric is halting production for maintenance, and some companies in Yichun with lithium mining rights have been ordered to halt production due to procedural issues. These measures have reduced the supply of lithium in the market, laying the foundation for a price rebound. Changes on the demand side are also not to be ignored. While the new energy vehicle market is extremely inward-looking and prices are weak, demand for energy storage continues to surge.
According to incomplete statistics from the CESA Energy Storage Applications Branch database, from January to June 2025, China's new energy storage capacity increased by 21.9GW/55.2GWh, a year-on-year increase of 69.4% (power) and 76.6% (capacity). Demand for high-density lithium iron phosphate materials for large-capacity energy storage cells has surged, and some companies have extended their production orders to the first quarter of 2026. These shifts in supply and demand have collectively driven the rise in lithium carbonate prices. The decline in lithium prices has ushered in a new era of large-scale application in the energy storage market. New energy storage capacity has maintained rapid growth over the past two years. However, with intensified market competition, price wars have severely squeezed the profit margins of energy storage companies.
Many energy storage battery and energy storage integrator companies have been severely impacted by cost pressures, with some forced to exit the market and many canceling some production capacity plans for energy storage batteries and energy storage systems. Some energy storage projects have also stalled or been delayed due to high costs, poor profit expectations, and changing domestic and international environments. According to incomplete statistics from the CESA Energy Storage Applications Division database, at least 26 energy storage capacity and power station projects have been terminated or postponed since 2025.
Energy storage capacity projects include technologies such as lithium-ion batteries, sodium-ion batteries, solid-state batteries, energy storage inverters, and system integration projects. Power station projects include standalone energy storage, solar-to-energy storage, and compressed air, with investments exceeding 10 billion yuan.
Rising lithium prices may offer hope for these stalled projects. This rebound will drive up energy storage cell and system costs.
To lock in costs, some developers are restarting or accelerating previously shelved production capacity and application projects. However, the reality may be more complex. For energy storage companies already signed low-price supply contracts, rising lithium prices mean further cost increases and squeezed profit margins. Even if projects are restarted, they could still face the risk of losses.
Furthermore, the development of energy storage projects depends not only on lithium prices but also on a variety of factors, including policy, market competition, and technological innovation. Lithium carbonate accounts for 40% of the cost of lithium iron phosphate batteries, and its price fluctuations significantly impact the economic viability of energy storage systems. It is estimated that for every 10,000 yuan/ton increase in lithium carbonate prices, energy storage cell costs increase by approximately 0.05 yuan/Wh and system costs by 0.08-0.1 yuan/Wh. Currently, energy storage projects generally rely on subsidies and electricity price differentials for profitability, resulting in extremely high cost sensitivity. Large-scale commercial and industrial projects and ground-mounted power plants are particularly price-sensitive. Fluctuations in lithium prices can cause fluctuations in energy storage system prices, leading to project delays due to lower IRRs (internal rates of return). Technically, by 2025, 500+Ah battery cells will have entered mass production. The delays and stagnation of some energy storage projects are primarily due to the phasing out of older production capacity due to technological advancements, with fluctuations in lithium prices having little impact.
A review of lithium price fluctuations reveals that lithium price cycles typically last two to three years, but this round of price increases is significantly different from the one in 2023, and the impact on the energy storage industry may not be as significant. This is primarily due to the continued growth of global lithium supply. By 2025, planned global lithium production capacity will exceed 2 million tons of LCE (lithium carbonate equivalent), far exceeding demand forecasts. Long-term price declines are likely. Second, the competitive landscape in the energy storage industry is beginning to take shape, with market share concentrating in leading companies. Orders are overflowing, and production capacity is fully utilized. To maintain customer and market share, these companies are attempting to minimize the impact of lithium price fluctuations on product prices.
For example, leading companies like CATL and BYD have locked in lithium resources through long-term agreements to mitigate the risk of price increases. From a policy perspective, from top-level planning to relevant ministries and commissions, multiple meetings have been held this year to combat price wars and involutionary competition. The newly revised Anti-Unfair Competition Law explicitly prohibits price wars that are below cost, and the Draft Amendment to the Price Law of the People's Republic of China (Draft for Comment) also regulates unfair pricing practices. These policies have created a favorable environment for the return of rational competition within the raw material supply chain and the energy storage industry. Over the past two years, the energy storage industry has experienced unchecked growth, relying on low prices and subsidies to grab market share.
Now, rising lithium prices have shattered this bubble, shifting the market from scale expansion to value competition. For energy storage companies, while rising lithium prices have created numerous uncertainties for the industry, the long-term prospects for its development remain promising. In the future, companies in the industry chain need to focus on technological innovation, cost control, and market expansion, strengthen cooperation with upstream and downstream companies, establish a stable supply chain system, and reduce the risks brought by raw material price fluctuations. At the same time, they should actively expand overseas markets, especially emerging markets such as the Middle East, Australia, and Africa, to find new growth points, increase investment in technological research and development, and improve product performance and competitiveness to adapt to market changes.
