Lithium finds a new life with increasing grid storage demand

Lithium prices have reversed a prolonged downturn, rising sharply in the second half of 2025. Chinese lithium carbonate prices increased from about $6,000 per ton to $11,000 per ton. Analysts at Goldman Sachs attribute the rebound to temporary supply cuts in China and stronger demand from energy-storage systems.

The shift follows a steep decline that began after the 2020–2022 lithium surge. Supply expanded rapidly during that period, but global electric-vehicle demand grew more slowly than expected. Higher borrowing costs and elevated new-car prices further dampened purchases, leaving the market with excess material through 2023 and 2024.

Goldman analysts, led by Lavinia Forcellese, said recent tightness has pushed back the timing of a price correction. They expect any sustained pullback to occur in the second half of 2026. The bank maintains that additional supply delays will be needed by 2027 to keep the market balanced.

Forcellese said the key factor behind the current price strength is unexpectedly high demand for energy-storage projects. That trend has drawn down inventories more quickly than projected and reshaped near-term market expectations.

Goldman’s outlook for 2026 points to two distinct phases. The first half of the year is projected to remain tight. The bank forecasts energy-storage demand rising 22 percent from a year earlier, with overall lithium demand up 24 percent. Inventory coverage is expected to fall to about 54 days, supporting prices near $11,000 per ton.

Conditions are expected to ease in the second half of 2026 as new supply reaches the market. Output is projected to rise 27 percent from a year earlier, helped by the restart of CATL’s lepidolite operations and increased spodumene production. Prices are seen drifting toward $9,500 per ton, above earlier forecasts but below futures levels on major exchanges.

The bank warns that surplus risk could return in 2027. Without production cuts, inventories could exceed 100 days. With reductions factored in, the estimate stands at 75 days. Prices for that year are projected around $9,250 per ton, well under current futures.

The storage boom has renewed optimism across the sector. Tesla chief executive Elon Musk said the United States could roughly double usable electricity output by expanding grid-scale battery systems.