The global lithium market is seeing a shifting balance as energy storage systems gain traction and reshape expectations for future demand. Rising interest in large-scale battery facilities has emerged alongside a three-year supply glut that has challenged producers, dented prices, and raised debate over whether lithium consumption will accelerate fast enough to tighten the market by 2026.

Lithium bulls see utility-scale battery storage as a meaningful new pillar supporting global demand. These increasingly common installations are designed to absorb and store energy for later release, serving as a buffer for power grids and renewable energy sources. While electric vehicles still account for the vast majority of lithium usage, analysts at Citigroup Inc., UBS Group Inc., and Bernstein expect storage systems to expand more rapidly than EV demand in 2026, potentially tipping the market into deficit next year.

Forecasts for increased storage-related consumption come after years of oversupply, during which lithium prices sank sharply. Spot values have swung dramatically across 2025 and, despite climbing about 50% from a four-year low in June, remain less than one-sixth of their levels in late 2022. The gap between slower-than-expected EV uptake and heavy investment in new mining capacity has kept the market well supplied, frustrating producers and investors who had anticipated stronger growth trajectories.

Analysts say the maturing state of EV adoption is contributing to this uncertainty. The sector continues to expand but faces challenges, including stagnant demand in China and unclear sales prospects in the United States. President Donald Trump’s move to relax fuel-efficiency standards as part of a broader effort to unwind incentives for EV production has added further uncertainty. Several Western automakers have also been rethinking their strategies amid shifting market conditions.

Energy storage, by contrast, is drawing increased attention as a potential stabilizer for lithium demand. The cost of constructing large-scale batteries has declined in recent years, improving project economics. Policy mandates designed to integrate more renewable power sources are also encouraging development. The rapid construction of data centers — facilities known for requiring stable, high-volume electricity supplies — is an additional factor that analysts and industry participants say could support storage-sector growth.

UBS analysts forecast lithium demand from storage to rise 55% next year, compared with an estimated 19% increase linked to EVs. They also describe the U.S. market for such batteries as “an attractive solution to address growing electricity supply-demand imbalances”, in a recent note.

China is projected to exceed a target of 180 gigawatts of cumulative energy storage capacity by 2027, adding another dimension to expectations for global demand. In China, where storage demand is rising, authorities are moving to tighten oversight. Beijing recently announced new policies aimed at curbing excessive competition in the battery sector. Iola Hughes, head of research at Benchmark Mineral Intelligence Ltd., said overproduction of battery cells and closer government supervision indicate that lithium demand from energy storage may be “choppier and probably softer in 2026–27 than the headlines suggest,” despite higher levels of installed storage capacity.

Supplies are also evolving. New mining capacity has been announced in China, Australia, Argentina, and several African nations. At the same time, uncertainty surrounding output at a mine in Jiangxi province, operated by Contemporary Amperex Technology Co., the world’s largest maker of EV batteries, has drawn attention to potential disruptions.

Views diverge on whether storage growth will be strong enough and sustained enough to reshape the market. What remains clear is that lithium demand is not defined by electric vehicles alone. As the industry moves deeper into the decade, the emergence of large-scale battery storage will influence both sentiment and pricing, even as debate continues about whether supply tightening will occur as predicted.