After years of oversupply, the lithium market is facing a possible turning point. While electromobility continues to account for the largest share of demand for the battery metal, a second pillar is increasingly coming to the fore: large-scale energy storage. Industry observers see these systems as a potentially decisive factor that could noticeably shift the global supply-demand balance for lithium as early as 2026.
Several large investment banks – including Citigroup, UBS and Bernstein – expect demand from stationary energy storage to increase so dynamically that the market could tip from oversupply back into deficit. Other analysts, however, warn that expectations are sometimes set too high.
Lithium between price slump and possible turnaround
In the past three years, the global lithium market has been characterized by a significant oversupply. New mines in various regions came online faster than demand – especially from the e-mobility sector – could grow. The result was a massive price decline: After the high at the end of 2022, spot prices temporarily fell to a four-year low and, despite a recovery of around 50% since June, are still well below the highs.
Electromobility continues to grow, but more slowly than long predicted. In China, the world’s largest e-car market, there is a certain phase of maturity, the growth rates are flattening. In the USA, President Donald Trump’s policies are creating additional uncertainty: The government is working on relaxed efficiency standards and is reducing incentives for e-vehicles. Against this background, Western carmakers are reviewing their strategies and timetables for the ramp-up of e-models.
Against this background, the question of which segments can close the gap that a more moderate e-car demand leaves for lithium is moving into focus. More and more analysts are referring to stationary energy storage here.
Energy storage: New pillar for lithium demand
Large-scale battery storage – often installed near solar and wind farms – absorbs excess electricity from the grid and releases it again with a time delay. These systems are technically closely related to e-car batteries and rely on similar cell chemistries and thus on lithium. According to Chris Williams, analyst at the consulting firm Adamas Intelligence, growth in the area of energy storage is now “the biggest swing factor” for cell production and thus for the demand for lithium in 2026.
Lower system costs and political requirements for the integration of renewable energies are driving expansion. In addition, there is a new structural driver: the massive construction of data centers and data infrastructure, for example for artificial intelligence. These systems require a stable and plannable power supply – an environment in which battery storage is playing an increasingly important role in smoothing load peaks.
China has set itself the goal of reaching a cumulative storage capacity of 180 gigawatts by 2027 and seems to be well on the way to even exceeding this goal. In the USA, UBS analysts rate stationary storage systems as an “attractive solution” to compensate for increasing imbalances between electricity supply and demand. According to the bank’s calculations, lithium demand from the storage segment could increase by 55% in the coming year, while the increase from the e-mobility sector is likely to be around 19%.
From the perspective of optimistic market observers, lithium could thus run into a structural deficit again as early as 2026, especially since some producers have simultaneously reduced their production.
Skepticism remains: Growth yes – but how stable?
Despite this dynamic perspective for energy storage, not every voice in the industry remains unreservedly confident. Martin Jackson, Head of Battery Raw Materials at the analysis firm CRU Group, continues to expect that supply will grow faster than demand in the coming year. From his point of view, part of the current euphoria is “dangerously inflated”.
A central point of criticism: The number of battery cells produced for storage systems is growing significantly faster than the capacity actually installed. There is a considerable discrepancy between the production of cells and the construction of fully installed storage systems. This could mean that some of the lithium batteries currently produced for energy storage are initially parked in inventories before they are reflected in real consumption.
EcoGrafSignals are also coming from China that the state wants to intervene more strongly in a regulatory capacity. Peking recently announced that it would accelerate measures to curb “excessive competition” in the battery industry. Iola Hughes, Head of Research at Benchmark Mineral Intelligence, points out that despite increasing installations of storage systems, a combination of state supervision and overproduction of cells could lead to demand growth for lithium in 2026 and 2027 to be “bumpier and probably weaker than headlines suggest”.
Supply expansions and producer voices
On the supply side, further capacity increases remain an issue. New projects are being driven forward in China, Australia, Argentina and several African countries. At the same time, there is uncertainty about the future production of an important mine in the Chinese province of Jiangxi, which is operated by Contemporary Amperex Technology (CATL), the world’s largest manufacturer of e-car batteries.
Nevertheless, some Chinese producers are confident. Jiang Anqi, Chairwoman of Tianqi Lithium, expects a largely balanced lithium market for 2026 and explicitly refers to energy storage as a pillar of this assessment. Ganfeng Lithium also reports that the dynamics in the storage sector have exceeded its own expectations.
The analysts at Bernstein see 2025 as a potential low point in the current cycle. Supply cuts in combination with robust demand – driven by e-mobility and energy storage – have already shifted the market towards a more balanced situation. For the years 2026 and 2027, they expect a further tightening of the market.
Conclusion: Lithium between redefinition and reality check
The discussion about lithium and energy storage as a “second demand pillar” shows how strongly the market is in transition. After a phase of massive oversupply, scenarios are now increasingly coming into play in which stationary battery storage systems could become an equal driver alongside electric vehicles.
