Prices of electric vehicles (EV) battery raw material lithium could increase further this year after having gained nearly 50 per cent and increased to a two-year high. However, analysts have said that it will depend on how the Iran war pans out and the demand-supply situation plays out.
“While we expect lithium prices to remain range-bound in the near term, we do not rule out the possibility of prices breaking higher on the back of a stronger-than-expected EV demand impulse, yet contingent on the bridging supply gap, which would limit the scope for sustained gains in 2026,” said research agency BMI, a unit of Fitch Solutions.
“…rapidly rising global investment in clean energy technologies, digital infrastructure, and defence-related technologies — all of which rely heavily on critical minerals — is set to sustain strong demand growth,” said the World Bank in its biannual Commodity Markets Outlook.
Price outlook
“Lithium battery shipments for data centre energy storage might rise over 80 per cent in the next five years… This surge in demand from new markets adds to the traditional battery needs of electric vehicles,” said Carboncredits.com website.
BMI said it was raising its 2026 average annual lithium price forecasts to $17,000/tonne for Chinese lithium carbonate to 99.5 per cent and $16,700/tonne for Chinese lithium hydroxide monohydrate 56.5 per cent, following an earlier out-of-cycle upward revision this year.
Currently, lithium carbonate is ruling at 177,000 Chinese yuan ($25,628) a tonne. Lithium hydroxide is quoted at $20,690 a tonne.
“Prices [are] headed into the year on a firmer footing amid tightening supply expectations, although early-year levels appeared to move beyond what fundamentals alone would justify, given mixed short-term demand signals,” it said.
Growth in energy storage
Lithium carbonate is derived from brine deposits (salt lakes). Spodumene and sub-surface brines are sources of lithium used in cathodes of lithium-ion batteries. Lithium hydroxide is obtained from lithium carbonate and is an EV battery material.
The World Bank said prices of critical minerals such as lithium are likely to remain highly sensitive to actual and expected trade restrictions. Environmental permitting challenges and long mine-development lead times are likely to continue constraining output expansion.
Carboncredits.com said rapid growth in stationary energy storage systems, ramping of production by China to meet increasing demand, support for EVs and energy support in Europe and North America, and concerns over supply constraints have lifted lithium prices.
BMI said supply-side swings, coupled with potentially stronger demand momentum from low-carbon industries amid the current energy shock, particularly through accelerated electric vehicle (EV) adoption, should support the lithium market’s rebalancing after a prolonged period of oversupply.
Supplies vulnerable
Swift restarts of previously idled higher-cost capacity during a price recovery could prompt production to ramp up quickly, although a protracted bout of disruptions may still be sufficient to sustain an upward price trajectory, it said.
The World Bank said mining and processing remain concentrated in a few countries, leaving global supplies vulnerable to idiosyncratic disruptions and geopolitical stress.
BMI said the US-Iran conflict that erupted in late February bolstered broader demand expectations for low-carbon industries, notably by potentially providing a stronger EV demand impulse given elevated energy prices.
It revived a more cautious outlook for energy storage system projects in West Asia. At the same time, the conflict is raising concerns over squeezed margins for lithium producers amid higher energy costs and possible sulphur shortages caused by a tightening chokehold on shipments flowing through the Strait of Hormuz, the research agency said.
BMI said prices are likely to stay range-bound in the near term and highly sensitive to geopolitical developments in West Asia, while the restart of Chinese supply amid robust demand expectations remains the pivotal catalyst for a price retreat.