Demand for lithium is expected to increase due to the growing demand for energy storage.
The boom in battery storage in 2026 has increased the demand for lithium, bringing 'hopes of an accelerated turnaround in an industry that is struggling with an oversupply.
Since the second half 2022, the lithium market has struggled with an?oversupply. Demand is not keeping up with the soaring supply - fueled by a price boom that was triggered in part by a surge in electric vehicle batteries. China's reforms in the power sector have helped fuel a stronger than expected demand in 2025 for lithium, which is used in batteries to store power. This has led to a cautiously positive outlook for the year ahead.
According to Jinyi Su of consultancy Fubao in Wuxi, the data centre boom in China has led to a growing demand for power storage. He added that the rapid growth in demand for lithium from energy storage has exceeded expectations in 2025's second half.
Su stated that "energy storage will likely become a game changer?for lithium in the future, improving its basic fundamentals. However, a too high price could undermine energy storage's economics, keeping prices down."
Battery storage systems are China's biggest clean-tech export. They will generate nearly $66 billion of sales in the first 10 month of 2025. Electric vehicles (EVs) will follow with around $54 billion.
Morgan Stanley predicts a deficit in 2026 of 80,000 metric tonnes?of Lithium Carbonate Equivalent (LCE), while UBS estimates a 22,000-ton deficit, compared to an expected surplus in 2025 of 61,000 tons. Three other Chinese analysts expect a "narrower" lithium market surplus in this year.
Four analysts who are not authorized to speak with the media have made a variety of predictions. According to their estimates, global lithium demand is expected to grow from 17% to 30% by 2026, while supply will rise between 19% and 34%.
Analysts predict a range of 80,000-200,000 Yuan ($11432-$28580) per tonne in 2026 compared to 58400-134500 yuan by 2025.
Turning Point?
The price of lithium continued to fall in the first half 2025. On June 23, it reached a 2025 low of 58.400 yuan, reducing margins for global miners and causing some to reduce output.
The global lithium price spike was triggered by Beijing's pledge in July to reduce overcapacity, including lithium, across several sectors. Also, the production stoppage at CATL's Jianxiawo Mine, which accounts for around 3% of world supply, has been halted since August.
On December 29, the price of lithium carbonate on the Guangzhou Futures Exchange rose by 130%, from its low this year to its highest since November 2023 (134,500 Yuan per ton). Fastmarkets, a provider of information, assessed spot prices over the same time period and found that they had risen by 108%.
According to calculations based on UBS data, the lithium demand for energy storage will?increase by 55% in 2020, after a 71% jump in 2025.
Guotai Junan, a broker, predicted that energy storage would account for 31% (up from 22%) of the total consumption in 2026. This is a significant increase from 2025. It will also eat into market share held by?electric car batteries.
But a potentially quicker-than-expected migration to sodium-ion battery technology for storage systems as well as slowing EV sales could reduce demand, while supply growth will limit the price upside, said analysts.
The head of China's passenger vehicle association warned in December of a decline in lithium battery demand in the first quarter, due in part to a drop in EVs sales, as tax incentives were phased out. $1 = 6.9980 Chinese Yuan
(source: Reuters)
