Global Lithium Market Pivots to Scarcity as Asian Demand Accelerates
Luxembourg, Saturday, 17 January 2026.
Commodities trader Traxys identifies a critical market pivot: the global lithium glut is ending. Driven by a projected 70% EV penetration rate in China this year, robust Asian demand is rapidly absorbing excess supply, pushing the sector back toward scarcity and reversing recent price trends.
Market Correction and Supply Dynamics
The global lithium market is undergoing a significant structural shift, moving rapidly from a surplus to a deficit as of early 2026. According to Martim Facada, managing director for lithium trading at Luxembourg-based Traxys, the sector is currently under-supplied, a condition driven by healthy Asian demand that has effectively absorbed the previous glut [1]. This turnaround marks the end of a volatile cycle where record-high prices previously incentivized excessive supply growth, leading to a subsequent price crash and the idling of various production projects [1]. Facada notes that while prices are recovering, the restart of idled capacity will lag behind the demand curve, stating that the market has “legs to keep going up” as the industry turns the corner on previous losses [1].
Asian Demand and Price Recovery
The primary catalyst for this scarcity is the accelerating adoption of electric vehicles (EVs) in China, the world’s largest market for battery metals. Projections for 2026 indicate that EV penetration in China is set to climb to between 60% and 70%, a substantial increase from the current level of slightly above 50% [1]. This surge represents a massive boost for lithium consumption, further supported by the growing energy storage sector which is becoming critical for balancing power grids [1]. Consequently, Chinese lithium prices have rebounded significantly, having more than doubled from the lows experienced in 2025, although they remain approximately 70% below the peak levels seen in late 2022 [1]. Amidst these soaring prices, capital markets firms have begun upgrading their spodumene pricing models to reflect expectations of stronger pricing over the next few years [4].
Strategic North American and Global Developments
In response to these market dynamics, strategic supply agreements and government initiatives are intensifying globally. Traxys recently solidified its position by signing a 10-year offtake agreement with Lilac Solutions to purchase lithium carbonate from the Great Salt Lake project in Utah, where production is scheduled to commence in early 2028 [1][2]. This deal secures phase one production and supports Lilac’s efforts to raise approximately $300 million, with the lithium earmarked for domestic US sales despite the expiration of certain EV subsidies [1][2]. Concurrently, in Canada, Elevra announced an accelerated expansion plan on January 16, 2026, for its North American Lithium (NAL) project, targeting an increase in spodumene concentrate production to 315,000 metric tonnes per year by late 2029 [3].
Long-Term Investment Outlook
Beyond North America, governments are actively positioning themselves within the critical minerals supply chain. On January 15, 2026, Nigerian President Bola Ahmed Tinubu declared lithium a priority resource for the nation’s clean energy transition, seeking cooperative ties with global investors for local processing [3]. Similarly, Ukraine has attracted capital investment for mineral development, with Prime Minister Yulia Svyrydenko confirming a bid win by TechMet and Lock Holdings involving at least $179 million in expected capital investment [3]. Looking at the broader horizon, the capital intensity required to meet future demand is staggering. Forecasts indicate that total capital expenditure in the battery sector must rise from $567 billion in 2030 to over $1.6 trillion by 2040 to accommodate a ninefold increase in battery demand [5]. Specifically, investment in recycling is projected to see the most dramatic growth, with capital requirements increasing roughly six-fold from $26 billion to $157 billion over that decade [5].