Lithium12 Dec 2025 09:42
Lithium bulls are betting on energy storage systems as the next meaningful pillar of demand for the battery metal, nudging the global market back toward balance after years of oversupply.
Giant utility-scale batteries, which absorb and store electricity for controlled release, are an increasingly important consumer of lithium. Though electric vehicles remain by far the biggest user of the metal, many analysts see demand from these storage systems rising at a faster clip than EV growth in 2026. Citigroup, UBS Group and Bernstein even see that expansion helping to tip the global market into a deficit next year.
The relative maturity of EV adoption means growth in energy storage “remains the largest swing factor” for battery-cell production — and therefore lithium demand — in 2026, said Chris Williams, an analyst at industry consultancy Adamas Intelligence.
The global lithium market has suffered from a supply glut over the last three years, with EV demand growing at a slower rate than expected and lagging the addition of new mine capacity. Spot prices have swung wildly this year and – despite recovering some 50% from a four-year low in June – they’re still less than a sixth of where they were in late 2022.
The EV sector, while still expanding, has been challenged by a maturing Chinese market and uncertain sales prospects in the US, where President Donald Trump has moved to relax stringent fuel-efficiency standards as part of his plan to wind back incentives for EV production. Western automakers have also been rethinking their strategies.
Battery storage, meanwhile, is becoming a significant demand driver for lithium. For one, the cost of building utility-scale batteries has declined in recent years. These improving economics, as well as policy mandates to integrate more clean energy, are helping with the scale-up. The construction of massive new data centers is a tailwind too, given their need for stable and plentiful supplies of electricity to smooth out peaks in power demand.
China is on track to exceed its new target of 180 GW of cumulative energy storage capacity by 2027, while in the US such storage systems are seen as “an attractive solution to address growing electricity supply-demand imbalances,” the UBS analysts said. Demand for lithium from the sector could rise 55% next year versus growth of just 19% from EVs, their data showed.
Other industry watchers are more circumspect. “We’re still predicting supply outpaces demand growth next year,” said Martin Jackson, head of battery materials markets at consultancy CRU Group, adding that some of the optimism was “dangerously inflated.” The number of cells being manufactured for storage systems is “immensely out of step” with the rate of installations, he said.
Sign In
Follow the stocks
