COMMODITIES 2026: Lithium carbonate surplus to narrow; energy storage to drive growth

Surplus in the global lithium carbonate market is expected to narrow in 2026, with both demand and supply set to grow in the year and energy storage demand is seen emerging as the most significant and outperforming driver of lithium-ion battery consumption.

Although demand growth from the traditional passenger electric vehicle segment is likely to be modest, the growth trajectory for electric heavy-duty trucks appears increasingly robust.

The global lithium chemicals market is anticipated to record a reduced surplus of 109,000 metric tons of lithium carbonate equivalent (LCE) in 2026, down from 141,000 mt in 2025, according to a report released by S&P Global Energy CERA in December. The report indicated that global consumption of lithium chemicals is forecast to rise 13.5% year over year to 1.48 million mt LCE in 2026, while supply is expected to increase 9.9% to 1.58 million mt LCE.

Energy storage market set for robust growth

The battery energy storage system (BESS) market started to grow strongly in Q3 2025. Lithium-ion battery industry experts widely expect that China's BESS growth in 2026 could maintain a rate of about 40%-60%, with its share of total battery production expected to rise further.

However, there are diverging views on the growth trajectory for BESS installations in the market.

The exuberance of the BESS market was excessive, according to S&P Global Horizons. The renewables markets team expected much slower growth in energy storage installations in 2026, dragged by weaker project economics in China due to the policy overhaul.

The team expected gross BESS capacity additions to total approximately 301 GWh in 2026, a 7.7% increase from 2025. This forecast focuses solely on new installations and does not encompass demand arising from capacity expansions or replacements.

Global sales of electric vehicles (EV) are expected to continue growing in 2026. However, as China's EV market penetration reaches 50%, the high-growth phase of the industry is approaching an inflection point, with the market transitioning into a new stage marked by "steady overall expansion and deepening structural divergence," some Chinese analysts said.

China is projected to remain the primary growth engine for global EV sales; however, domestic sales growth may slow due to the reinstatement of a 5% vehicle purchase tax, according to Chinese market participants. The EV trade-in subsidy program is expected to continue supporting China's EV production and sales in 2026, although it may struggle to achieve significant growth in the passenger vehicle segment, they said.

Global passenger plug-in hybrid EV sales are expected to reach 22.77 million units in 2026, up 16.8% year over year, according to S&P Global Energy CERA's report. The growth rate has been declining since 2022 and reached its lowest level since 2019, when the growth rate was 7.4%, according to the report.

However, due to the increasing demand for power batteries driven by rising commercial EV production and their higher battery capacity per unit, lithium demand from the EV sector is still expected to grow in 2026, the participants said.

China's electric heavy truck sales reached 183,370 units over January-November, up 190.6% compared to 63,106 units in the same period last year, the data released by Green Heavy Truck—a Chinese commercial vehicle research agency showed. There is a broad consensus that sales of new energy heavy-duty trucks will continue to surge, and the penetration rate is expected to surpass the 30% threshold by 2026.

While there is a consensus on demand expectations, their realization remains unverified. A sustained, sequential increase and strong support from the energy storage sector beyond the seasonally weak first quarter will be necessary to confirm signs of a cyclical demand recovery, according to Chinese sources, including consumers, traders, and analysts.

Supply to keep growing in 2026

There is still ample lithium supply, despite inventory depletion, the ongoing stoppage at Contemporary Amperex Technology Co. Ltd.'s Jianxiawo mine in China and emerging disruptions in Nigeria — the latter accounting for 13.8% of China's spodumene imports in the first 10 months of 2025, the S&P Global Energy CERA's report said.

Global lithium raw materials supply is expected to increase 10% year over year to reach 1.63 million mt LCE in 2026, the report showed.

Sustained high prices could accelerate the launch of new upstream projects. If lithium carbonate prices rise in 2026 due to strong demand from the energy storage market, additional supply capacity is still expected to come online, mainly from previously shut-down or idle operations in Australia and select ore projects in Africa, some sources said.

If the resumption timeline for the Jianxiawo mine falls significantly short of market expectations, and if Nigeria continues to be affected by geopolitical tensions, these factors may lead to periodic supply shortages, sources added.

Australian miners would exercise significant caution when restarting spodumene production due to a mix of financial, logistical, and regulatory challenges. Their confidence, and consequently investment, depends on sustained high prices of over $1,000/mt for six months. Even after deciding to restart, the process typically takes at least 12 months due to difficulties such as securing mining contractors, paying large mobilization fees, and reapplying for mining licenses. These factors together lead to a slow and cautious approach to resuming production, sources in Australia said.

Since the second half of 2025, policy tailwinds have caused frequent disruptions in China's domestic mining sector. Issues related to mining permits in Yichun city, Jiangxi province—a major lithium chemical producer—have repeatedly affected the market, with attention later shifting to the restart of CATL's Jianxiawo mine.

China's lithium carbonate prices trended upwards in the second half of 2025, driven by supply disruptions and strong demand from the energy storage system and electric vehicle sectors.

Platts, part of S&P Global Energy, assessed battery-grade lithium carbonate at Yuan 117,000/mt ($16,734/mt) on a DDP China basis on Dec. 31, 2025, up 58.1% since the start of the year. The prices reached Yuan 125,000/mt on Dec. 26, 2025-- the highest level since Nov. 25, 2023.

Platts assessed the price at Yuan 141,000/mt DDP China Jan. 9.