Lithium Market Outlook – Bernstein Analysis
Bernstein argues that the lithium market is in the middle of a recovery cycle, driven by tightening supplies and resilient battery demand, which together suggest that price appreciation is likely to continue into 2027 rather than peak this year. After three years of volatile price swings, lithium carbonate has rebounded sharply in 2026, moving from roughly $8,000 per tonne in mid‑2025 to a current range of $20,000‑$25,000 per tonne. The price briefly touched $30,000 per tonne in May before easing as some previously idled production capacity re‑entered the market, although Bernstein believes these supply additions will not keep pace with demand growth.
Demand dynamics show a year‑to‑date increase of about 32% for lithium, outstripping supply growth of roughly 24%. The strongest demand driver is energy‑storage systems (ESS), which have surged nearly 100%, while electric‑vehicle (EV) demand has risen more modestly at 9%. This demand‑supply imbalance has driven lithium inventories down to an estimated 20 days of supply, a level historically associated with stronger pricing as buyers compete for scarce material.
On the supply side, mining firms reduced capital expenditure over the past two years after prices collapsed from their 2022 peak. New projects typically require around three years from final investment decision to production, and while about 200,000 tonnes of previously curtailed capacity may gradually restart, Bernstein expects capacity additions to decelerate beyond 2026, raising the risk of a supply deficit in 2027.
Despite higher spot prices, Bernstein contends that battery costs have fallen sufficiently over the past two years to allow both ESS developers and EV manufacturers to absorb lithium prices in the $30,000‑$35,000 per tonne range without materially harming project economics. Reflecting this view, the brokerage raised its average lithium carbonate price forecast to approximately $25,000 per tonne for 2026 (up from $21,000) and to $32,500 per tonne for 2027 (up from $25,000), while maintaining a long‑term estimate of $16,000 per tonne as supply eventually catches up.
The overall conclusion is that the combination of shrinking inventories, restrained mine investment, and accelerating battery demand indicates that the current lithium price recovery still has room to run, with the peak more likely to occur closer to 2027 than in the current year.