Lithium: Is the Market Quietly Setting Up for Its Next Cycle?
- Nicholas Rundle
- 1 day ago
- 4 min read
The Rise, The Fall... and What Comes Next?
Few commodities have experienced the boom-and-bust cycle of lithium over the past five years.
As electric vehicle (EV) adoption accelerated after COVID, demand for lithium exploded. Prices reached record highs, mining companies rushed to build new projects, and investors piled into anything connected to battery metals.
Then came the inevitable correction.
New supply entered the market faster than demand could absorb it. Prices fell sharply, investor sentiment turned negative, and many concluded the lithium story was over.
But commodity markets don't stay out of balance forever.
Today, the data suggests we may be entering the next phase of the cycle. Or does it?
Why Lithium Matters
Lithium has become one of the world's most important strategic resources.
It powers:
🚗 Electric vehicles
🔋 Home battery systems
⚡ Grid-scale energy storage
💻 Consumer electronics
🤖 AI infrastructure requiring backup battery storage
While new battery technologies continue to emerge, lithium-ion batteries remain the dominant technology because of their energy density, reliability and established global manufacturing base.
Demand Keeps Growing
One misconception is that slowing EV sales have caused lithium demand to disappear.
That simply isn't what the data shows.
According to the International Energy Agency (IEA), global battery demand is expected to more than triple by 2030 under current policy settings.
Battery storage is also becoming a major growth industry as electricity grids transition toward renewable energy.
Demand isn't disappearing, it's broadening.
China Remains the Centre of the Industry
Almost every lithium market indicator ultimately comes back to China.
The latest Battery Metals Market Update highlights several important trends:
✅ Chinese battery production reached a record 206 GWh in June, up 53% year-on-year.
✅ Lithium imports remain extremely strong.
✅ Australian spodumene exports continue increasing as refiners maintain high utilisation rates.
In other words...
Manufacturers are still building batteries at record levels despite weaker lithium prices.
The Most Interesting Chart in Lithium Right Now
Price charts receive all the attention.
Inventory charts often tell the better story.
The chart shows inventories peaking above 140,000 tonnes during 2025 before steadily falling to below 90,000 tonnes.
That's a reduction of more than 50,000 tonnes.
The Voltaire Minerals market update reaches the same conclusion, noting that SMM weekly inventories have now fallen to approximately 86,900 tonnes, representing a decline of more than 55,000 tonnes from the August 2025 peak.
Why Inventories Matter
Commodity markets rarely turn because prices tell them to. They turn because inventories begin falling. When stockpiles shrink, it usually means consumption is running ahead of available supply.
It doesn't guarantee higher prices tomorrow.
But historically it has often been an early indicator that market conditions are tightening.
This is one of the key reasons many analysts are watching lithium inventories more closely than lithium prices and 2026 has given us a great show on what happens when supply hits a snag.
Earlier this year the Jianxiawo lepidolite mine was closed in August 2025 coinciding with the peak of inventories. It produces roughly 100,000t per annum which is about 8% of China's lithium output. It was then re-opened in July. So it would be reasonable to argue that the draw down in inventories replaced the lost production of the Jianxiawo mine.
This sent the price soaring and, more recently, falling.
It's a sign that the market is tight without being undersupplied. Yet.
The Supply Side Is Becoming More Disciplined
Lower prices have forced many producers to become more selective and place expensive mines in to care and maintenance.
In addition, Investors and offtakers are prioritizing:
Low-cost hard-rock or brine operations
Projects in stable mining jurisdictions
Clear pathways to production and offtake agreements
Strong balance sheets and experienced management
That means those with the capital are also being more disciplined.
New projects require considerably higher prices before they become commercially viable and have stalled. There's a long list, here's a few:
Maricunga Project (Chile): State-owned copper miner Codelco delayed the anticipated startup of this flagship salt flat lithium project to 2034 (a four-year pushback from its prior 2030 target) due to protracted permitting and community consultation timelines.
Wolfsberg Project (Austria): European Lithium faced a court ruling that invalidated a key environmental approval, pushing its final investment decision to late 2026 at the earliest.
Bécancour / Nemaska Lithium Plant (Canada): Rio Tinto (as majority owner) and the Quebec government slowed and adjusted development and commissioning timelines for this integrated asset following capital optimization reviews.
Mt Ida Project (Australia): Delta Lithium opted to preserve cash and focus on extended study phases rather than rush an immediate construction or development trigger
All this increased discipline and accountability at a time when battery demand continues to grow.
This combination naturally reduces excess inventories over time.
The Battery Metals Report - CME Group also highlights that China's lithium imports remain robust while battery production continues setting new records, despite softer pricing.
Electric Vehicles Continue Growing
Another misconception is that EV growth has stalled.
Recent European & Chinese data suggests otherwise.
The Voltaire Minerals report shows:
European EV sales reached a record 507,000 vehicles in June.
EV market share increased to 36%.
Sales were 42% higher than the same month last year.
Chinese manufacturers continue expanding rapidly across Europe through exports and local manufacturing partnerships.
It's a similar story with EV's in Australia.
While growth rates may fluctuate from year to year, the long-term adoption trend remains firmly upward.
What Investors Should Be Watching
Instead of focusing solely on today's lithium price, investors should monitor the underlying fundamentals.
Some of the most useful indicators include:
Battery production
EV sales
Grid-scale battery installations
Chinese lithium inventories
Mine expansions and project delays
Global lithium import data
Further mine closures
These indicators often move well before commodity prices do.
Our View
Commodity markets are cyclical. There are always periods of oversupply which are eventually followed by periods of tightening supply.
The chart for Pilbara Minerals (PLS) shows the volatility of the market.
With lithium stocks down 40% or more from their highs some value will emerge. The question is where.
The chart for inventories is a key data point to watch as the Jianxaiwo mine brings production back to capacity.
If Inventories continue falling its a sign the market needs more supply and prices should rise.
That's a trend worth watching.
Sources
International Energy Agency – Global EV Outlook
Investing News Network – Lithium Forecast (https://investingnews.com/daily/resource-investing/battery-metals-investing/lithium-investing/lithium-forecast/)
Voltaire Minerals – Battery Metals Market Update (24 July 2026)
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