The global lithium market ushers in a new super cycle

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Based on the steady progress of energy transition scenarios, existing lithium supply projects are unlikely to meet demand by the mid-2030s, highlighting the need for continued investment in the lithium value chain. Driven by new mining capacity, refining infrastructure, and regional supply chain demands, lithium-related investments are expected to peak between 2030 and 2034.

The global lithium market is at a critical turning point.

Recent reports indicate that a supply shortage more urgent than expected is accelerating—on one side, electric vehicles (EVs) are the main driver of increasing lithium demand, and on the other, energy storage is a “second growth point” stimulating demand. There is a consensus that the market is tightening. Price signals are the most obvious; by 2026, lithium prices in various regions worldwide are rising to different degrees, seemingly heralding a new supercycle in the lithium market.

Supply Shortages May Arrive Earlier Than Expected

Wood Mackenzie recently released the “Energy Transition Lithium Outlook,” stating that global lithium shortages could occur as early as 2028.

The report presents four energy transition scenarios: In a delayed transition, by 2050, global lithium demand will be about 5.6 million tons, with shortages appearing after 2037; in a steady transition, by 2050, the global lithium supply gap will be approximately 6.7 million tons, with shortages starting in 2029; in an accelerated transition, demand will reach 13.2 million tons by 2050; and under a net-zero emissions scenario, shortages will begin in 2028 and persist into the mid-21st century, with a supply gap reaching 8.5 million tons by 2050.

Under the steady energy transition scenario, existing lithium supply projects are unlikely to meet demand in the mid-2030s, emphasizing the necessity for ongoing investment in the lithium value chain. Wood Mackenzie notes that driven by new mining capacity, refining infrastructure, and regional supply chain needs, lithium-related investments are expected to peak between 2030 and 2034.

“Supply tightness in the lithium market will arrive much earlier than expected—possibly within just two years,” said Alan Pedersen, Director of Research at Wood Mackenzie. “This means action is needed now, as the projects currently approved will determine lithium supply and demand trends in the 2030s.”

While recycling old lithium batteries can add some incremental supply, it cannot resolve the short-term shortages. Wood Mackenzie points out that recycling supply is growing at 13%–16% annually, and as EV batteries reach the end of their lifespan, significant recycling volumes will emerge starting in the 2040s.

Major investment banks generally agree that the lithium market is tightening. Morgan Stanley forecasts a shortfall of 80,000 tons of lithium carbonate equivalent by 2026, while UBS predicts a shortage of 22,000 tons.

UBS states that lithium demand growth will be 14% in 2026 and further accelerate to 16% in 2027. Due to structural demand outpacing supply growth, a supply gap is expected to persist until 2027. Global lithium demand is projected to increase to 3.4 million tons by 2030.

Lithium’s role in energy transition is irreplaceable, and the industry faces structural supply challenges. “The lithium supply gap is imminent; the issue is not how much lithium is needed, but how to mobilize capital more quickly to obtain more lithium,” emphasized Alan Pedersen.

Energy Storage as a New Growth Point for Lithium Demand

Electrification is driving a significant increase in lithium demand, with EVs remaining the primary catalyst. Under the four scenarios in the “Energy Transition Lithium Outlook,” EVs account for 72%–80% of lithium consumption. In the steady transition scenario, EV adoption will reach about 75% by 2040; under the net-zero scenario, it will reach 95%. By mid-century, batteries across all applications will account for 96%–98% of lithium consumption.

“EVs are a major driver of lithium demand growth, but another hidden growth point comes from energy storage,” said Rebecca Grant, Senior Research Analyst at Wood Mackenzie. “As renewable energy dominates new power generation capacity, the grid will require large-scale flexibility, and demand for energy storage systems will grow at 6%–7% annually.”

As a “second growth curve,” energy storage is becoming a game-changing variable. UBS expects lithium demand for energy storage to grow by 55% in 2026. The boom in global data center construction is also accelerating lithium demand for industrial energy storage. Deutsche Bank raised its 2026 energy storage demand forecast by 7%, emphasizing that this is a core variable transitioning the lithium market from a “cyclical rebound” to a “structural rebalancing.”

UBS notes that energy storage will surge 71% in lithium demand by 2025. Driven by rebounding EV sales and soaring demand for battery storage systems, global lithium demand is expected to grow 14% in 2026 and another 16% in 2027.

As a result, UBS has raised its 2026–2035 energy storage demand forecast by 30%–53%, expecting energy storage to increase its share of lithium demand from 8% in 2020 to 42% by 2035, becoming a key pillar of lithium consumption.

Lithium Prices May Enter a Third Supercycle

Currently, the lithium market is driven by intensified supply disruptions and rising energy storage demand. Reuters notes that with the explosive growth of the energy storage market and steady growth in new energy vehicles, this dual-driven pattern will provide strong support for lithium prices. Since 2026, lithium prices have rebounded after a long period of decline.

From 2020 to 2022, lithium prices rose from less than $10 per kilogram to nearly $70. In 2024–2025, due to expanded mining capacity and slower-than-expected EV adoption in Western countries, prices began to decline and hovered at historic lows.

In the first half of 2025, lithium prices continued downward, reaching cycle lows mid-year. Data compiled by Reuters shows that on June 23, 2025, lithium carbonate prices hit their lowest point of the year at $8.05 per kilogram. In August 2025, CATL announced a suspension of mining operations at Jiangxi Yichun due to expired mining permits, which contributed 3% of global lithium supply. From the second half of 2025, prices started to rebound strongly.

Entering 2026, lithium prices maintained strength at the start of the year but experienced some market divergence. According to IMARC, in January, lithium prices in Northeast Asia reached $13.12/kg, up 21.1% month-over-month; in Europe, $11.92/kg, up 6.6%; in North America, $9.94/kg, up 11.8%; and in South America, $7.76/kg, up 10.5%.

According to the China Nonferrous Metals Industry Association Lithium Branch, domestic battery-grade lithium carbonate prices rose from 119,000 yuan/ton at the beginning of January to 152,500 yuan/ton at month’s end, a 28.15% increase.

By late February, the global fourth-largest lithium producer, Zimbabwe, announced a halt to all mineral and lithium concentrate exports, which helped push prices higher. Against this backdrop, UBS raised its lithium carbonate price forecast to $26,000 per ton, roughly $26 per kilogram, and judged that the global lithium market has entered its third supercycle, with persistent supply-demand gaps supporting prices well above market consensus.

Multiple investment banks and analysts project lithium prices will stay between $11,432 and $28,580 per ton, or approximately $11.43 to $28.58 per kilogram.

Text by: Wang Lin, Staff Reporter

Produced by: China Energy News (cnenergy)

Edited by: Yan Zhiqiang