Investing.com -- Macquarie analysts said last week that the recent decline in lithium prices has been driven primarily by liquidity and technical factors in the futures market, rather than fundamental demand weakness.

The price correction reflects a rapid unwinding of speculative positions, stricter VAT enforcement that pushed previously undisclosed inventory into futures delivery, and supply concerns including CATL mine resumption and Zimbabwe exports, according to the firm's report following meetings with lithium and energy storage system supply chain experts in Shanghai and Hong Kong.

The spot market remains stable, with battery manufacturers increasing procurement as prices fall, the analysts said. Macquarie views the pullback as creating more attractive entry points and named Ganfeng Lithium (SZSE:002460) and Tianqi Lithium (SZSE:002466, HKEX:9696) as top picks.

The firm said demand for energy storage systems remains strong in 2026, with shipment forecasts revised upward from 900 GWh to approximately 1,000-1,100 GWh. Visibility beyond 2026 is less clear, with many market participants expecting demand to soften in 2027 or 2028.

Macquarie maintains a more positive outlook on the cycle duration, citing domestic policy support still in early implementation stages, accelerating demand outside China particularly in residential and commercial segments, and rising power system stability requirements.

Supply chain experts indicate battery manufacturers have largely passed through lithium cost increases in energy storage systems but with less success in electric vehicles. At the system integration level, competition is intensifying in the mid to low-end market, while price transmission remains more effective in the high-end segment.

Margins are likely to remain under pressure in the second and third quarters of 2026 due to delayed revenue recognition, the analysts said. The firm favors Sungrow Power Supply (SZSE:300274) for solid-state technology exposure and high-end energy storage market positioning.