Lithium

What it is

Lithium (chemical symbol Li, atomic number 3) is the lightest solid element. Batteries account for 87% of global lithium demand as of 2024, up from roughly 35% in 2010; EV packs and stationary grid storage both depend on lithium-ion chemistry, with no commercially scaled alternative in place. Ceramics and glass (5%), lubricating greases (2%), and medical uses make up the remainder.

Three feedstocks dominate supply: hard-rock spodumene (principally from Australia), brine evaporites from salt flats in Chile, Argentina, and Bolivia, and emerging sedimentary clay deposits under development in the US and Serbia. Direct lithium extraction (DLE), a hydrometallurgical process that bypasses multi-year solar evaporation ponds, is moving toward commercial scale across several Argentine salt flats.

History

Lithium was first isolated in 1817 and remained a niche industrial input through most of the 20th century. Sony's commercialisation of the lithium-ion battery in 1991 started the structural demand shift. Mass EV production after 2015 pushed battery demand past ceramics for the first time around 2016. A supply squeeze from 2021 to 2023 drove battery-grade lithium carbonate to approximately US$80,000/t by late 2022, pulling in enormous new project investment. That capital wave eventually overshot: by December 2025, carbonate prices had collapsed to roughly US$13,000/t, prompting producers including Albemarle to idle refining capacity in Australia.

Current state

As of early 2026, the oversupply thesis has broken. Battery-grade lithium carbonate rose from about US$13,433/t in December 2025 to US$26,278/t by late January 2026, a 95% rally in six weeks. Canaccord Genuity projects a structural deficit from 2026 through at least 2035. Global consumption reached 263,000 tonnes in 2025, up 20% from 2024; EVs drive 58% of incremental demand, while battery energy storage systems grew 51% as AI-driven data-centre investment enlarged grid-storage requirements.

World resources total roughly 115 million tonnes (USGS, 2025). Australia leads in mine output; Argentina, Chile, and Bolivia together hold more than half of global identified resources. The Salar de Atacama in Chile's Antofagasta region holds the highest-grade lithium brine (0.15% by weight) of any known source. China processes roughly 70% of all refined lithium globally and is on track to control 81% of spodumene conversion capacity by 2027.

Outside China, diversification is underway: Albemarle's Kings Mountain project in North Carolina cleared its US EPA review in March 2026, Rio Tinto's Rincón operation in Argentina made its first export shipment, and Zimbabwe's growing sulphate volumes extend supply geography beyond the Lithium Triangle. EnergyX's Lonestar DLE project and Ganfeng's Argentine solid-state programme represent bets that next-generation extraction and cell chemistry will restructure the cost curve alongside geography.

Relationships

The EU Critical Raw Materials Act designates lithium as a strategic material and sets binding targets for domestic extraction, processing, and recycling by 2030. SQM's Q1 2026 results show how carbonate price swings flow directly through the revenues of the two dominant brine producers and Chile's state royalties from the Atacama concession. Commercial-scale battery recycling is emerging as a secondary supply stream, recovering black-mass lithium at volumes that are beginning to register in market balances.

Bolivia's Salar de Uyuni holds the world's single largest lithium deposit, but development has stalled repeatedly; the state-owned Yacimientos de Litio Bolivianos insists on domestic value-add and limits foreign equity, leaving most of the resource undeveloped as of mid-2026.

What to watch

Three variables will determine the lithium story through 2027: whether DLE ramp-ups in Argentina deliver enough new brine supply to cap the price recovery before a fresh demand surge; whether China deploys export controls on lithium chemicals (it restricted graphite exports in 2023 and the legal mechanism for broader mineral controls is in place); and whether US and EU domestic processing investments, backed by a US$3 billion US Department of Energy package and Critical Raw Materials Act strategic-project designations, can reach material output in time to reduce dependence on Chinese conversion capacity.