Rapid growth in battery energy storage is strengthening the outlook for lithium demand in 2026, raising expectations of a faster recovery for an industry that has struggled with oversupply since late 2022. Analysts say reforms in China’s power sector and surging global investment in data centres have driven stronger-than-expected demand for lithium used in stationary storage systems.
China’s energy storage market expanded sharply in the second half of 2025, supported by policy changes and rising power system needs. According to analysts, demand growth from energy storage has already exceeded earlier forecasts, helping to offset weaker momentum in electric vehicle sales. Battery storage systems have become China’s most valuable clean-tech export, generating nearly $66 billion in sales in the first ten months of 2025, ahead of EV exports.
Major banks now expect a tightening lithium market next year. Morgan Stanley forecasts a deficit of 80,000 tonnes of lithium carbonate equivalent (LCE) in 2026, while UBS projects a smaller shortfall of 22,000 tonnes, compared with a surplus of 61,000 tonnes expected in 2025. Global lithium demand is projected to grow by 17% to 30% in 2026, broadly in line with supply growth of 19% to 34%, according to analysts.
Prices rebounded sharply in the second half of 2025 after hitting multi-year lows earlier in the year, aided by Beijing’s pledge to rein in overcapacity and a temporary production halt at a major Chinese mine operated by CATL. Lithium carbonate prices on the Guangzhou Futures Exchange rose to their highest level since November 2023 by the end of December. Analysts expect prices to range between 80,000 and 200,000 yuan per tonne in 2026.
Energy storage is forecast to account for 31% of total lithium demand next year, up from 23% in 2025, gradually reducing the dominance of electric vehicle batteries. However, analysts caution that faster adoption of sodium-ion batteries for storage and a slowdown in EV sales could cap demand growth and limit further price increases.
