In late August, the lithium mining sector was bathed in the positive glow of half-year earnings reports. As of August 24, all 24 constituent stocks of the Wind Lithium Mining Index had released their 2026 interim results, with 11 companies posting net profits exceeding RMB 1 billion. Notably, five companies—Salt Lake Industry, Western Mining, Ganfeng Lithium, Zangge Mining, and Tianqi Lithium—each surpassed RMB 3 billion in net profit, recording RMB 6.15 billion, RMB 4.169 billion, RMB 4.125 billion, RMB 3.638 billion, and RMB 3.55 billion, respectively.

Growth figures were staggering, with Rongjie Co seeing a 1076.14% year-on-year surge in net profit, Yahua Group expecting a 783.83% increase, and Tibet Mining and Shengxin Lithium posting gains of 492.46% and 220.3%, respectively. A further eight enterprises swung back to profitability. The shift from collective massive losses in 2024 to widespread profit doubling in the first half of 2026 shows just how rapidly and forcefully lithium salt producers' balance sheets have healed. However, the capital market's reaction has been mixed; in May, lithium carbonate prices plummeted from a high of RMB 200,000 per ton, even briefly dipping below RMB 140,000 in July, which sent lithium stocks tumbling. It wasn't until August, when futures prices rebounded and the main contract climbed over 15%, that the sector regained momentum. The earnings surge is real, but the core question troubling the market is this: is this prosperity a post-industry-clearing profit repair, or the start of a new upcycle?

Where is the money coming from?

A closer look at the half-year reports reveals three key drivers behind the explosive profit growth. The most direct factor is pricing. Data from Shanghai Steel Union shows that in the first half of 2026, the average spot price for domestic battery-grade lithium carbonate was approximately RMB 163,500 per ton, a 132.2% year-on-year increase. Although prices fell sharply after May, the average price level for the half-year was still more than double that of the same period last year, directly determining lithium salt producers' gross margins. Zangge Mining's lithium carbonate business achieved a gross margin of 71.08% in H1, up 40.55 percentage points year-on-year, serving as a typical example of this price surge's impact.

Production volume provided the second layer of support. Salt Lake Industry stated clearly in its earnings forecast that H1 net profit attributable to shareholders is expected to be between RMB 6 billion and RMB 6.3 billion, a year-on-year increase of 131.38% to 142.95%. This growth is driven by both higher prices and volumes for potassium chloride, as well as increased lithium carbonate output from the newly operational 40,000-ton-per-year basic lithium salt project. Zijin Mining has dubbed its lithium segment the "third growth pole," with H1 lithium carbonate equivalent production reaching 43,600 tons, a 496% year-on-year increase, and its Manono lithium mine achieving heavy media separation plant commissioning about a month ahead of schedule.

Additionally, the low base from the previous year amplified the gains. During the 2024 price slump, Tianqi Lithium lost RMB 7.9 billion for the full year, and Ganfeng Lithium lost RMB 2.074 billion. As prices recovered, the same production capacity quickly shifted from "losing blood" to "generating blood." Tianqi Lithium expects H1 net profit attributable to shareholders of RMB 2.85 billion to RMB 4.25 billion, a year-on-year increase of approximately 33 to 49 times. Ganfeng Lithium's half-year net profit of RMB 4.125 billion has already surpassed its full-year 2025 profit by more than double. This multiplier effect is a classic characteristic of cyclical stocks and serves as a reminder to view "significant earnings growth" with caution—it reflects price recovery from extremely low levels rather than a revolutionary change in operations.

A rollercoaster year for lithium prices

To understand this earnings cycle, one must first examine lithium price trends this year. In H1, domestic lithium carbonate spot prices operated within a range of RMB 117,000 to RMB 210,000 per ton. At the start of the year, stronger-than-expected demand and supply-side disruptions pushed prices upward. On May 13, the main lithium carbonate futures contract briefly hit a stage high of RMB 206,500 per ton, with spot prices also temporarily exceeding RMB 200,000. What followed was a sharp reversal. From mid-May, futures prices declined continuously, with the main contract hitting a low of RMB 170,200 on May 27, approaching RMB 157,000 in early June, and reaching an intraday low of RMB 136,800 on July 21—a cumulative decline of nearly 34% from the peak.

Industry insiders attribute the pullback to several factors. First, the initial rally was fundamentally driven by speculation on "supply disruptions" that didn't fully materialize. Second, hidden inventory became visible—when Shanghai Nonferrous Metals Net expanded its inventory sample coverage rate from 50%-60% to 70%-80%, the market discovered approximately 36,000 additional tons of off-balance-sheet inventory. Third, Guangzhou Futures Exchange warehouse receipts accumulated steadily, exceeding 55,000 lots in early June, a record high since listing, which debunked the "low inventory" narrative. Prices have warmed again since August, with the lithium carbonate 2701 contract closing at RMB 158,900 per ton on August 24, and the 2612 contract hitting an intraday high of RMB 162,300, marking a new monthly high. The main futures contract has accumulated a gain of over 15% in August. Yet, even after this rebound, prices remain significantly below the May highs.

Supply: Tight now, looser later

Returning to the present, the rebound of lithium prices above RMB 160,000 in August owes much to a temporary contraction in supply. Several lithium carbonate production lines, including those of Sinomine Resource Group, Tianhua New Energy, and Jiuling Lithium, have successively announced maintenance and shutdown schedules. Additionally, the Jianxiawo lithium mine in Yichun, Jiangxi, remains offline, and other suspended mines in Yichun are still in the early stages of the license renewal process, putting phase pressure on lithium salt supply. These factors, combined with downstream restocking demand, form the current price support.

However, looking further ahead, supply loosening is on the horizon. The biggest variable is CATL's Jianxiawo lithium mine. This mine, with proven ceramic stone ore resources of 960 million tons, equivalent to approximately 6.57 million tons of lithium carbonate, and a full-capacity annual output exceeding 100,000 tons, has been halted for nearly a year. On July 7, the Credit China website announced that Yichun Times New Energy Mining Co., Ltd. obtained a safety production license change permit for non-coal mines, signaling that resumption is increasingly likely. Before the shutdown, this mine produced 7,000 to 8,000 tons per month, accounting for about 10% of China's monthly lithium demand. Overseas supply is also expanding: Australia shipped 530,000 tons of lithium concentrate to China in June, a 51% month-on-month surge, with July shipments continuing to climb. Restarts by miners like MinRes and Core Lithium, along with expansions at mines such as Greenbushes, are underway. Zimbabwe's February lithium ore export ban saw export quotas approved for six companies in April, with related raw materials expected to arrive in China around August. Goldman Sachs even projects 2026-2027 global supply additions of approximately 1 million tons of lithium carbonate equivalent, half of current global annual demand. With supply tight in the near term but loose in the longer term, market disagreement on lithium prices is born—bulls focus on potential maintenance delays and underwhelming restart progress, while bears point to the mines already on the table and the shipping data.

The new engine of demand

If the supply side is a tug-of-war between constraints and expansion, demand represents the most solid aspect of this rally. Data from the China Automotive Power Battery Industry Innovation Alliance shows that from January to July, domestic sales of power and energy storage batteries totaled 1164.6 GWh, a 48.1% year-on-year increase. Notably, energy storage battery sales reached 374.2 GWh, surging 78.6% year-on-year—more than double the growth rate of power batteries (37.1%)—and now account for 32.1% of the total. According to institutional estimates, August lithium battery production schedules exceeded 300 GWh, an all-time high, with energy storage accounting for roughly 40%.

Terminal penetration rates are also climbing. Data from the China Association of Automobile Manufacturers shows that in July, new energy vehicle production and sales reached 1.576 million and 1.561 million units, respectively, up 26.8% and 23.7% year-on-year, with new vehicle sales accounting for 60.4% of the market. Exports totaled 553,000 units, a 1.5-fold year-on-year increase, with export share exceeding 50% for two consecutive months. Salt Lake Industry presented a long-term narrative in institutional research, highlighting the strategic value of new energy and traditional energy complementarity, alongside the rapid development of emerging sectors like energy storage and humanoid robots, which will drive long-term lithium salt demand. The past two years' singular narrative of "lithium demand equals electric vehicles" is being replaced by a diversified structure of "EVs plus storage plus robots," providing the confidence for bulls to call for a "cycle reversal."

Reversal or repair?

With earnings already delivered, whether this is a true reversal or merely a repair remains a point of significant divergence within the industry. Liu Youhua, Research Director at PaiPaiWang, asserted directly that the lithium industry has shifted from a surplus cycle to a tight balance cycle, potentially marking "the starting point of a lithium industry cycle reversal," transitioning from tight supply-demand to an overall shortage. Guosen Securities calculates a domestic lithium carbonate supply-demand gap of approximately 46,800 tons for 2026 and believes the industry's high-profit cycle may persist. China Securities Co., Ltd. predicts that with the peak demand season in H2, the supply gap will gradually widen, peaking in Q4, with the annual price high possibly occurring between the end of Q3 and the beginning of Q4.

Conversely, Zheng Xiaoqiang, an analyst at Shanghai Steel Union, believes H2 will feature a "tight near-term, loose long-term, high volatility under tight balance" dynamic, with lithium carbonate prices more likely to experience high-level fluctuations rather than a one-way rally. He characterizes the current situation as "more like profit repair after industry clearance, rather than a confirmed large-scale new cycle." He outlines four conditions for a genuine industry inflection: sustained destocking at the mining end in Q4, increased spot trading volumes, restocking by lithium salt plants, and a rise in 30-day point-pricing costs without a significant increase in restart supply—all four being indispensable. Pacific Securities views Q3 and Q4 of this year as critical verification points: if the peak demand season genuinely arrives, coupled with Jianxiawo restart underperformance, the supply-demand gap may widen temporarily. Conversely, if Jianxiawo meets its schedule while demand disappoints, the market structure could loosen.

The joy in the half-year reports is genuine, but it describes the past—an H1 average price of RMB 163,500. The market's real task is to determine where lithium prices will stand over the next two years. The RMB 160,000 price level connects on one side to optimistic scenarios of maintenance, peak season, and supply gaps, and on the other to pessimistic projections of Jianxiawo's restart, overseas supply expansion, and future oversupply. The contours of this divergence are becoming increasingly clear.