SunSirs: Supply Shortages Combined with Energy Storage Demand Drive a New Supercycle in the Global Lithium Market

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

The global lithium market is at a critical turning point.

Several recently released research reports indicate that a supply shortage—more urgent than anticipated—is rapidly approaching. With electric vehicles serving as the primary driver of lithium demand growth on one hand, and energy storage acting as a “second growth engine” on the other, a consensus has emerged regarding the tightening market. Prices undoubtedly serve as the clearest signal: as 2026 begins, lithium prices have risen to varying degrees in many regions worldwide, seemingly heralding a new supercycle for the lithium market.

Supply Shortages May Arrive Sooner Than Expected

Wood Mackenzie recently released its “Lithium Outlook for the Energy Transition,” noting that globally, a lithium supply shortage could emerge as early as 2028.

The “Lithium Outlook for the Energy Transition” presents four energy transition scenarios: Under the delayed energy transition scenario, global lithium demand will reach approximately 5.6 million metric tons by 2050, with shortages emerging after 2037; Under the steady energy transition scenario, the global lithium supply gap will reach approximately 6.7 million metric tons by 2050, with shortages beginning in 2029; under the accelerated energy transition scenario, global lithium demand will reach 13.2 million metric tons by 2050; under the net-zero emissions target scenario, shortages will begin in 2028 and persist through the middle of this century, with a supply gap of 8.5 million metric tons by 2050.

Based on the baseline scenario of a steady energy transition, existing lithium supply projects are unlikely to meet demand by the mid-2030s, highlighting the need for continued investment in the lithium value chain. Wood Mackenzie notes that lithium-related investment is expected to peak between 2030 and 2034, driven by new mining capacity, refining infrastructure, and regional supply chain needs.

“Supply tightness in the lithium market will emerge much sooner than expected—as early as two years from now, a shortage could materialize,” said Alan Pedersen, Research Director at Wood Mackenzie. “This means action must be taken now, as currently approved projects will determine the trajectory of lithium supply and demand in the 2030s.”

While the recycling of end-of-life lithium-ion batteries can provide some incremental supply, it cannot resolve the immediate shortage. Wood Mackenzie notes that recycled supply is growing at a rate of 13%–16% annually, and as electric vehicle batteries reach the end of their useful life, significant volumes of recycled material will become available starting in the 2040s.

Investment banks generally agree that the lithium market is tightening. Morgan Stanley forecasts a shortage of 80,000 metric tons of lithium carbonate equivalent in 2026, while UBS predicts a shortage of 22,000 metric tons.

UBS states that lithium demand growth will reach 14% in 2026 and further increase to 16% in 2027. As structural demand growth outpaces supply growth, a supply gap is expected to persist through 2027, with global lithium demand projected to rise to 3.4 million metric tons by 2030.

Lithium plays an irreplaceable role in the energy transition, 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 secure more lithium,” emphasized Alan Pedersen.

Energy Storage: A New Growth Driver for Lithium Demand

Electrification is driving significant growth in lithium demand, with electric vehicles remaining the primary driver. Across the four scenarios outlined in the *Lithium Outlook for the Energy Transition*, electric vehicles account for 72% to 80% of lithium consumption. Under the Steady Energy Transition scenario, EV penetration will reach approximately 75% by 2040; under the Net-Zero Emissions scenario, penetration will reach 95%. By mid-century, batteries across all applications will account for 96%–98% of lithium consumption.

“Electric vehicles are a major driver of lithium demand growth, while 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 a rate of 6%–7% annually.”

Energy storage, serving as the “second growth curve” driving lithium demand, is emerging as a game-changing variable. UBS forecasts that demand for lithium-ion energy storage will grow by 55% in 2026. The global boom in data center construction is accelerating the growth of lithium demand for industrial energy storage. Deutsche Bank has raised its 2026 energy storage demand forecast by 7%, emphasizing that this is the core variable in the lithium market’s transition from a “cyclical rebound” to a “structural rebalancing.”

UBS noted that energy storage’s demand for lithium surged by 71% in 2025. Driven by a rebound in electric vehicle sales and surging demand for battery energy storage systems, global lithium demand is projected to grow by 14% in 2026 and a further 16% in 2027.

Consequently, UBS has raised its energy storage demand forecasts for 2026–2035 by 30%–53%. It projects that energy storage’s share of lithium demand will surge from 8% in 2020 to 42% in 2035, becoming a major pillar of lithium consumption.

Lithium Prices May Enter a Third Supercycle

Currently, the lithium market is being driven by a dual force: intensifying supply-side disruptions and surging demand for energy storage. Reuters notes that as the energy storage market explodes and the new energy vehicle market grows steadily, this dual-engine dynamic will provide strong support for lithium prices. Globally, since 2026, lithium prices have shown a new upward trend following a prolonged slump.

From 2020 to 2022, lithium prices rose from less than $10 per kilogram to nearly $70. From 2024 to 2025, influenced by factors such as capacity expansion in the mining sector and the slower-than-expected adoption of electric vehicles in Western countries, lithium prices began to decline and hovered near historical lows.

In the first half of 2025, lithium prices continued their downward trend, hitting a cyclical low by mid-year. According to data compiled by Reuters, on June 23, 2025, the price of lithium carbonate reached its lowest point of the year at $8.05 per kilogram. In August 2025, CATL announced a suspension of mining operations at its Yichun lithium mine in Jiangxi due to the expiration of its mining license; this mine accounted for 3% of global lithium supply. Starting in the second half of 2025, lithium prices began a strong rebound.

Entering 2026, lithium prices maintained their strength at the beginning of the year before entering a phase of high-level volatility, with some divergence in prices across different markets. According to data from market research firm IMARC, in January, lithium prices in Northeast Asia reached $13.12 per kilogram, a month-over-month increase of 21.1%; in Northeast Asia, lithium prices reached $11.92 per kilogram, a 6.6% month-over-month increase; in North America, prices stood at $9.94 per kilogram, up 11.8% month-over-month; and in South America, prices reached $7.76 per kilogram, a 10.5% month-over-month increase.

According to data from the Lithium Industry Branch of the China Nonferrous Metals Industry Association, the domestic price of battery-grade lithium carbonate rose from 119,000 yuan per ton at the beginning of January to 152,500 yuan per ton by the end of the month, an increase of 28.15%.

In late February of this year, Zimbabwe, the world’s fourth-largest lithium producer, announced a suspension of all exports of raw ore and lithium concentrate, which contributed to a shift in the upward trend of lithium prices. Against this backdrop, UBS raised its lithium carbonate price forecast to $26,000 per ton, equivalent to approximately $26 per kilogram, and concluded that the global lithium market has entered its third price supercycle, with the persistent supply-demand gap supporting prices significantly higher than market consensus.

Based on the combined assessments of multiple investment banks and analytical institutions, lithium prices are expected to remain between $11,432 and $28,580 per ton, equivalent to approximately $11.43 to $28.58 per kilogram.

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