Strongly growing demand from energy storage and data centers meets supply cuts – analysts see lithium transitioning from surplus to deficit in 2026.
Lithium Demand Shifts: Energy Storage Catches Up with E-Mobility
The lithium market has undergone a tough correction since 2022: An extreme price boom in the wake of the electric car hype was followed by a pronounced oversupply of lithium, which put prices under pressure until mid-2025 and forced producers worldwide to make cuts.
Now, a new force is emerging in the market: battery storage for power grids. A boom in stationary energy storage systems – driven by reforms in the Chinese electricity sector – has noticeably boosted demand for lithium in the second half of 2025 and is generating cautious optimism with a view to 2026.
According to Chinese industry observers, lithium demand from the energy storage sector is growing faster than expected. In addition to grid storage, the massive expansion of data centers in China and worldwide is also gaining in importance: AI data centers and cloud infrastructure require more and more secured power and long-term storage – often lithium-based.
Analyst Jinyi Su from the consulting firm Fubao speaks of a possible “game changer” for lithium: Energy storage could sustainably improve the market’s fundamentals, but at the same time create a natural upper limit for the price through cost restrictions. This is because excessively high lithium prices significantly worsen the economic viability of large storage projects.
China has turned battery storage into one of its most lucrative cleantech export products within a short period of time: In the first ten months of 2025, energy storage systems generated exports worth around USD 66 billion – even more than electric vehicles, whose export volume was around USD 54 billion.
Lithium Between Surplus and Deficit: Prices Rise Again
Even in 2025, the market was formally characterized by a surplus. Lithium prices continued to fall in the first half of the year, reaching an annual low of 58,400 yuan per ton of lithium carbonate on June 23, 2025. Margins and share prices of many lithium producers came under considerable pressure, and some companies reduced production or postponed projects.
Then came the turnaround:
- In July, Beijing announced that it would take stricter action against overcapacities in various industries, including lithium.
- In August, industry giant CATL stopped production at the Jianxiawo mine, which accounts for around 3% of global lithium supply.
These signals triggered a strong countermovement. On the Guangzhou Futures Exchange, the price of lithium carbonate rose by around 130% to 134,500 yuan per ton by December 29, 2025 – the highest level since November 2023. Spot prices, recorded by Fastmarkets, rose by around 108% in the same period.
For 2025, analysts still expect an average surplus of around 61,000 tons of lithium carbonate equivalent (LCE). However, the picture is shifting for 2026. For example, Morgan Stanley forecasts a deficit of around 80,000 tons of LCE, while UBS expects a smaller deficit of around 22,000 tons. Other Chinese analysts are at least assuming a significantly reduced surplus.
Estimates for the growth of lithium demand for 2026 range from 17% to 30%, while supply is expected to increase by 19% to 34% according to current forecasts – the range reflects uncertainties regarding project start-ups, cuts and possible delays.
Accordingly, the expected price range for lithium has shifted upwards: While prices for 2025 were between 58,400 and 134,500 yuan per ton, analysts now see a range of 80,000 to 200,000 yuan (around USD 11,400 to 28,600) per ton for 2026.
Energy Storage as a Growth Driver – But Risks Remain for the Lithium Market
The market for lithium in stationary energy storage is developing particularly dynamically. Based on UBS data, this results in growth of around 71% for 2025; a further increase of around 55% is expected for 2026.
This is shifting the demand structure in the lithium market: In 2025, energy storage is expected to have accounted for around 23% of global LCE demand, but according to broker Guotai Junan, this share could be around 31% as early as 2026. This development is at the expense of the share of classic e-mobility batteries, which continue to form the largest, but no longer solely dominant, demand block.
Despite the positive picture, several risk factors remain for lithium in 2026:
- Technological change:
The focus is shifting to the sodium-ion battery for stationary applications. Should manufacturers switch to this technology faster than expected, this could dampen lithium consumption in the storage segment – particularly in systems where energy density is less critical than costs. - Slowed e-mobility:
In China, the head of the national passenger car association has already warned of a decline in battery demand in the first quarter of 2026. The reason for this is, in particular, the expiry or reduction of tax incentives for electric vehicles. If the momentum in the EV sector remains weaker, this will have a direct impact on lithium demand for traction batteries. - Price cap through project economics:
While a tightening market and possible deficits tend to justify higher lithium prices, the business models of storage and EV projects come under pressure if prices jump too sharply. This, in turn, could delay investments and curb demand – a mechanism that is likely to limit prices upwards.
The bottom line is that there are many indications that lithium will enter a new phase in 2026: away from a clear surplus, towards a fragile balance with the prospect of deficits. Three factors will be decisive here: the pace of expansion of energy storage, the actual course of EV demand and the speed with which producers and projects react to the changed market conditions.
