After a brutal two-year correction, the structural forces behind lithium demand have not merely survived, they have multiplied. The question for investors is no longer whether, but how much.
The Lithium Standard: A Fundamental Pillar of the Energy Transition
The lightest metal on the periodic table with the greatest ability to move energy efficiently, lithium is the indispensable element of the modern age.
Alternative battery chemistries have been floated for decades. But none can match lithium’s energy density, cheapness, relative safety and weight. This makes it central to the future of energy and technology.
Market Mechanics: Lithium has No Single Benchmark Price, and That Matters
Lithium is different to famous commodities like gold and copper in that it doesn’t have a single price or trade as a single compound. Instead, it trades in at least three forms:
Lithium carbonate: used primarily in cheap lithium batteries, which dominate grid storage and the electric vehicle (EV) mass market. It is usually produced from evaporating ponds in South America.
Lithium hydroxide: the premium version used for high performance, long range EVs favoured by brands like Tesla and Porsche.
Spodumene concentrate: the raw lithium rock – famous in Australia – mined from the ground that is sent to refineries to be turned into high grade battery chemicals.
These three forms of lithium trade at different prices and in different regions. As a result, there is no single “lithium price”.
There are lithium futures in China that are becoming increasingly influential. But most lithium is still bought through private, direct deals. This creates a decentralised market with discrepant pricing. For the investor tracking a single headline, the true value of these companies can be underestimated, creating a major opportunity for those with a global perspective.
The Cycle: From Purgatory to Renaissance
The lithium market has spent two years in purgatory. After prices collapsed 80% from their 2022 highs, driven by a surge in supply and premature fears that sodium ion batteries would displace lithium entirely. Investors largely walked away and the psychological damage was considerable.
That sentiment now looks mispriced. Across every major lithium compound; carbonate, hydroxide and spodumene prices have staged a decisive recovery. Battery grade lithium carbonate prices in Asia have risen more than 90% from their October 2025 lows, with spot prices in early 2026 nearly doubling to above US$26,000 per tonne within weeks. The rally reflects something real, a market that after years of surplus, is now tipping into deficit.
Source: J.P. Morgan Research, October 2025
JP Morgan, whose analysts updated their supply/demand models to account for the energy storage boom, now forecasts a lithium market deficit persisting through 2030 even under conservative assumptions. Morgan Stanley projects a deficit of 80,000 tonnes of lithium carbonate equivalent in 2026 alone. UBS, more conservative, estimates a 22,000-tonne shortfall. The variance is a question of magnitude, but not direction. The consensus is that the era of oversupply is ending.
“After what was looking like a soft few years ahead for lithium prices, energy storage battery shipments have shown massive growth.” — J.P. Morgan Research, October 2025
The Demand Engine: Electric Vehicle and Beyond
Global EV sales reached 20.7 million units in 2025, representing one in four new cars sold worldwide. China remains the dominant market, with 12.9 million units sold at a penetration rate exceeding 50%. Meaning EVs now outsell combustion engine cars in China. But European EV sales are growing at 33%, overtaking China as the fastest growing major region. European EVs also tend to carry larger battery packs, meaning European growth has an outsized impact on lithium volumes per unit sold.
2025 EV SALES BY MAJOR REGION
Region | Units sold | Market share | YoY growth |
China | 12.9 million | ~53% | +17% |
Europe | ~3.8 million | ~23% | +33% |
United States | ~1.6 million | ~8–10% | Flat |
Rest of world | ~2.4 million | Varies | +48% |
Sources: Benchmark Mineral Intelligence; IEA Global EV Outlook 2025; Strategy& / PwC Q4 2025 EV Review
But the most consequential demand development of 2025 was big batteries for energy storage. Specifically, the data centre boom triggered by AI.
According to Benchmark Mineral Intelligence, battery demand from energy storage systems (ESS) grew 51% in 2025. Far outpacing the 26% growth rate of EV batteries. This is no longer a rounding error, ESS now accounts for roughly 19% of total battery demand in China and is growing its share in every major market. In North America, ESS has surged to 26% of total battery demand, driven in significant part by grid stabilisation requirements linked to the massive buildout of AI data centres. JP Morgan now projects ESS will represent 30% of total lithium demand in 2026, rising to 36% by 2030.
Albemarle, the world’s largest lithium producer, confirmed in its February 2026 results that global lithium demand reached 1.6 million tonnes of lithium carbonate. A 30% year-on-year increase. For 2026, the company projects demand to rise to between 1.8 and 2.2 million tonnes, implying growth of 15% to 40%. Its long term view is demand will hit 3.7 million tonnes a year in 2030.
LITHIUM DEMAND BY END USE (2025 ESTIMATE)
Segment | Share of 2025 demand |
Electric vehicles | ~65% |
Battery energy storage (ESS) | ~23% |
Consumer electronics & other | ~12% |
Sources: Benchmark Mineral Intelligence; J.P. Morgan; Albemarle 2025 full-year results
Future Optionality: The Next Wave of Innovation
The near term case is compelling. But what has institutional investors excited is the demand pipeline from emerging technologies.
Morgan Stanley’s global materials team has produced detailed analysis of humanoid robotics and its implications for critical minerals. Each humanoid robot requires approximately 2 kilograms of lithium. At the scale Morgan Stanley projects, the firm expects the humanoid market to reach more than one billion units by 2050. The implications for lithium are staggering. By 2040, Morgan Stanley estimates that humanoid adoption alone could push the lithium market into a deficit of close to 80% of supply. The bank’s analysts describe critical minerals as the “Achilles’ heel” of the humanoid build out. Without lithium, the robots simply cannot be powered.
Solid state batteries, which replace liquid electrolytes, enables higher energy density and faster charging, are also highly lithium intensive. Commercial production is beginning to scale, with several major automakers and battery manufacturers announcing production milestones. These batteries typically require more lithium per cell than conventional lithium ion designs.
The Supply Wall: the investment gap that cannot be quickly closed
Against this demand backdrop, supply has been severely impaired. Two years of prices below the incentive level for new project development have left the pipeline threadbare. During the downturn, feasibility studies for new lithium projects fell from dozens per year to fewer than ten in 2025. That gap cannot be closed quickly. In permitting constrained jurisdictions like Canada and Australia, a new mine typically takes six to ten years from discovery to first production.
CURRENT SUPPLY CURTAILMENTS
Miners who have survived the downturn have adopted what the industry calls a “value over volume” approach; they are in no hurry to flood a recovering market. This discipline, born of hard experience in the 2023 bust, provides a floor for prices. Even when the incentive price is exceeded, supply responses will be slow.
Curtailment | Detail |
Albemarle, Australia | The US producer idled its Kemerton lithium hydroxide processing facility in Western Australia in response to low prices, removing significant refining capacity from the market. |
CATL, China | CATL’s Jianxiawo lepidolite mine in Jiangxi Province — representing roughly 3% of global supply — was suspended after its mining permit expired in August 2025, and its restart timeline remains uncertain. |
China regulatory reform | Beijing’s tightened mineral permitting regime, part of a broader “anti-involution” campaign targeting overcapacity in strategic sectors, has cancelled or delayed numerous mining permits across Chinese lepidolite operations. CRU Group estimates the affected operations represent up to 17% of projected 2026 global supply. |
Zimbabwe | The Zimbabwean government has required foreign miners — predominantly Chinese operators — to invest in domestic processing infrastructure before resuming extraction, stalling a meaningful tranche of African supply. |
Portfolio Construction: The Case for Global Diversification
Australian investors naturally reach for ASX listed names like Pilbara Minerals and Liontown. But ASX miners produce only spodumene, which feeds the hydroxide market. Missing the larger, faster growing lithium carbonate market served by global producers like Albemarle and SQM, who also sit lower on the cost curve. They also capture none of the refining margin, which accrues almost entirely to processors in China and Chile.
The ETFS Global Lithium Miners ETF (ASX: VOLT) resolves each of these gaps. It spreads exposure across all three lithium compounds, across the mine to-refinery value chain, and across every major producing region. Without requiring investors to pick the winners in a sector where volatility can be severe.
The entry point is compelling. Lithium equities have lagged the commodity rebound, a pattern that historically precedes significant re-rating. With forecasts predicting deficits to 2030 and the new supply pipeline still largely absent, the asymmetry favours early movers. In a market defined by complexity and fragmentation, the greatest risk isn't being in the wrong lithium stock, it's being in only one part of the story.
Sources: Albemarle Q4 2025 earnings call (February 2026); Benchmark Mineral Intelligence (January 2026); J.P. Morgan Research: “Lithium: ESS demand to pull the market into deficit” (October 2025); Morgan Stanley: “Humanoid Robots’ Hunger for Minerals” (June 2025); S&P Global Energy CERA Commodities 2026 report; IEA Global EV Outlook 2025; CRU Group lithium supply analysis; Investingnews.com Q1 2026 Lithium Market report.
Disclaimer: The issuer of units in ETFS Global Lithium Miners ETF (VOLT)(ARSN: 692 458 530) is the responsible entity of the Fund, being ETF Shares Management Limited (ABN 77 680 639 963, AFSL: 562 766).
The product disclosure statement (PDS) and Target Market Determination (TMD) for the Fund contains all of the details of the offer of units in the Fund. Copies of the PDS and TMD are available from ETF Shares Management Limited or at www.etfshares.com.au.
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