Energy storage cell supply cannot meet demand: orders scheduled into next year, companies accelerating expansion to meet surging demand

Ask AI · How can enterprises avoid overcapacity risks amid the wave of expansion?

21st Century Business Herald Reporter Fe Xinyi

The continuously booming global energy storage market is making battery cells an unprecedentedly hot commodity.

Recently, the 21st Century Business Herald interviewed multiple sources and learned that domestic energy storage cell capacity has fully entered a state of supply shortage, with leading companies’ energy storage cell orders scheduled through the first quarter of 2027. Meanwhile, spot prices for battery cells have rebounded sharply from their 2025 lows, reversing the industry’s bargaining power.

At the same time, driven by the supply-demand gap, a new wave of capacity expansion has been triggered in the domestic energy storage cell sector. Several companies announced large-scale expansion plans. However, industry insiders warn that there is a need to be cautious of overcapacity risks following the concentrated release of capacity. Rushing into irrational expansion not only risks repeating the cyclical pitfalls of the new energy industry but may also lead to quality and compliance issues caused by price competition, damaging China’s global reputation in energy storage.

Reversal of supply and demand in the battery cell market

“Currently, Envision’s battery cell orders are continuously full, and all global battery cell bases are operating at high load,” said Tian Qingjun, Senior Vice President of Envision, in an interview. He straightforwardly stated that the current supply and demand tension in the energy storage cell market has exceeded industry expectations.

This tension has propagated throughout the entire industry chain. The reporter learned that since the second half of last year, the market has seen extreme cases where system integrators prepay cash in advance to lock in cell capacity, solely to ensure delivery.

Price fluctuations in the spot market for battery cells also directly reflect the reversal of industry patterns. By mid-2025, the price of energy storage cells had fallen to a low of 0.24 yuan/Wh, with conventional transaction prices only around 0.26-0.27 yuan/Wh. By early 2026, industry insiders revealed that quotes of 0.37-0.38 yuan/Wh had become difficult to obtain for spot cells.

In less than a year, the energy storage cell segment has shifted from a “buyer’s market” to a “seller’s market.”

Industry insiders understand that the current formation of the supply-demand gap for energy storage cells results from the combined effects of demand, policies, costs, and supply, and is unlikely to see fundamental relief in the short term.

On the demand side, the global energy storage market has entered an explosive growth phase, with domestic and international demand resonating. Overseas markets, for example, have shifted from the previous UK single-point outbreak to regional growth across Northern Europe, Southern Europe, and Western Europe, with large markets in Germany, France, and Spain expanding significantly; the Australian market, stimulated by subsidy policies, has seen rapid demand growth over the past year; the US market, driven by the construction of AIDC computing centers, has increased urgency for power equipment, with the overall international market in a state of order shortages.

Policy effects are also significant. Since April 2026, China’s battery export rebate policies have gradually phased out, and with 90% of global energy storage cells supplied by China, the removal of rebates will directly raise construction costs for overseas projects, triggering a global rush to install, with many overseas projects locking in supplies early, thus short-term demand in the supply chain surging.

On the cost side, continuous increases in raw material prices have become the core support for rising cell prices, further intensifying hoarding and capacity locking behaviors.

Industry insiders calculated that a 10k yuan/ton increase in lithium carbonate prices raises the cost of cells by about 0.006 yuan/Wh; lithium carbonate prices have risen from 70k yuan/ton to 170k yuan/ton, pushing up cell costs by over 0.06 yuan/Wh alone. Coupled with simultaneous increases in copper, aluminum, electrolyte, and other key raw materials, the comprehensive cost of energy storage cells has increased by 0.08–0.1 yuan/Wh since 2025.

It is noteworthy that the market transmission of cell price increases has also created divergence for Chinese companies’ overseas expansion strategies.

European and American clients are less sensitive to price and place greater emphasis on equipment reliability, long-term service guarantees, and compliance credentials. Price transmission is relatively smooth, and project gross margins are significantly higher than domestically. Conversely, markets like the Middle East and India are extremely cost-sensitive, making price transmission difficult. Currently, many large storage players have exited the Middle East, with industry capacity primarily shifting toward high-margin European and American markets. Meanwhile, the industry’s contract pricing mechanisms are also undergoing comprehensive adjustments. The previously common fixed-price model is shifting toward a raw material-linked model to better manage upstream cost fluctuations.

A new wave of capacity expansion focusing on high-end production

In fact, supply-side rigid constraints make it difficult to fill the demand-supply gap in the short term.

The reporter learned that from upstream raw material procurement to production line construction, a complete cycle for battery cell factories typically takes at least a year, making it impossible to quickly match the surging market demand in the short term, resulting in a rigid mismatch between supply and demand.

Under the sustained demand gap and profit improvement expectations, a new round of capacity expansion has been triggered in China’s energy storage cell sector. Leading companies are increasing capacity deployment and focusing on developing high-end, differentiated capacities to avoid low-end homogeneous competition.

Since 2026, domestic large-capacity energy storage cells have entered a period of intensive production. For example, Envision’s 790Ah globally largest winding energy storage cell was put into production earlier this year, with additional projects in Cangzhou, Hebei, and Yichang, Hubei, scheduled for mid-2026; CATL’s 587Ah cells achieved mass production in June 2025, with 2GWh shipped by the end of 2025, and new production lines in Chengdu, Luoyang, and other locations to be densely launched by 2026; Chuen New Energy’s 588Ah cells and an 80GWh project in Yichang are expected to be completed by August 2026; Pengcheng Unlimited’s large cell project in Yibin will start construction in February 2026.

Ganfeng Lithium is also accelerating the transition to large-cell capacity. Senior engineer Zhang Wei explained that Ganfeng Lithium is one of the few domestic manufacturers capable of mass-producing large cells, and the company is pushing the capacity shift from 314Ah to 588Ah cells.

“The company owns resources like spodumene lithium ore, giving it a cost advantage in cell production, so our product prices are more competitive,” Zhang Wei said. He added that cell prices are influenced by lithium carbonate prices. Previously, as lithium carbonate prices rose, cell prices followed suit, following normal market transmission. Even with resource ownership, the company must adjust prices in line with market fluctuations. Although prices will rise, the overall competitiveness remains.

Concerns over irrational expansion emerge

The fundamental support for rapid industry growth provides a basis for capacity expansion. According to incomplete statistics from CNESA DataLink’s global energy storage database, China’s new energy storage installed capacity has ranked first globally for four consecutive years. By the end of 2025, China’s cumulative installed capacity of power storage projects reached 213.3GW, accounting for 43.0% of the global market, with a year-on-year increase of 54%.

However, the current tight supply-demand situation also conceals the risk of future overcapacity from concentrated capacity releases. Several interviewees emphasized that the current rapid expansion trend is unsustainable and that there are multiple risks associated with rushing into capacity expansion.

InfoLink predicts that the supply-demand pattern for energy storage cells in 2026 will be “tight balance in the first half, moderate loosening in the second half.” GGII expects that by March 2026, 500Ah+ cells will have achieved large-scale mass production and delivery, and their penetration into the energy storage market will rapidly increase, becoming the mainstream choice for domestic and overseas large storage projects.

From an industry perspective, large-capacity cell capacity will be released in the second half of 2026, effectively alleviating the current tight supply-demand balance but also posing a risk of structural overcapacity due to concentrated production.

Tian Qingjun said that Envision’s capacity planning always revolves around high-quality customers and orders. “The real issue is the tightness of supply and demand for cells, and enterprise capacity expansion is reasonable. The key is what kind of capacity to expand, what customers to serve, and what markets to target. Instead of pursuing maximum scale, it’s better to lock in long-term strategic customers, match high-value scenarios, and ensure each production line has a clear delivery target. Rational capacity layout is the way to navigate cycles.”

Beyond the core risk of overcapacity, the hidden risks behind rapid industry expansion are even more worth vigilance.

In terms of quality and safety, large-scale fire tests have become a standard threshold for overseas large storage projects’ delivery and financing. Price competition and “internalization” may lead companies to sacrifice product quality and safety standards. Several industry insiders warned that if a single company experiences a serious safety incident with energy storage stations overseas, it could directly impact China’s overall energy storage industry reputation and market access.

Tian Qingjun warned that overseas compliance environments are extremely demanding. Once delivery or performance issues arise, it could be a fatal blow to the company and damage China’s energy storage industry’s overall image. Meanwhile, most overseas large storage projects require long-term service agreements of 15-20 years. Most domestic companies lack extensive operational experience in such long-term overseas maintenance, and aggressive low-price bids could create major hidden costs and liabilities for future operations and compliance.

“Chinese energy storage entrepreneurs need to elevate their perspective and not treat going abroad merely as a business,” Tian Qingjun urged. Companies should shift their focus toward enabling local energy transition to green, low-carbon, and low-cost solutions, integrating into local industrial ecosystems, and supporting local industry and talent development. Only by adopting such principles in international cooperation can they achieve long-term stability, safeguard China’s global competitiveness in energy storage, and use new energy to create global prosperity.