What’s Driving Lithium Demand in 2025 and Beyond?

The second half of 2025 is shaping up to be a decisive period for lithium. In a recent industry poll we conducted, lithium was voted the raw material with the strongest expected market performance. Market participants anticipate a renewed upward trajectory in demand, with structural drivers extending well beyond the year.

The market evidence supports this view. Lithium remains central to the global electrification strategy. Demand growth is anchored in electric vehicles (EVs) and energy storage systems, and it is reinforced by government-led industrial policies in key markets. The International Energy Agency (IEA) projects that under its Stated Policies Scenario (STEPS), lithium demand for clean energy technologies will rise more than 5x by 2040, with electric vehicles alone accounting for the majority of that growth. This expansion is already visible in the short term; Metalshub customer Albemarle forecasts global demand reaching 1.8 million tonnes of lithium carbonate equivalent (LCE) in 2025, doubling again to 3.7 million tonnes by 2030.

Figure 1. Albemarle projection of lithium demand growth to 2030, with demand expected to reach 3.7 Mt LCE (Credit: Green Car Congress)

Electric Vehicles Remain the Foundation

Global EV sales continue to set new records, with over 20 million units expected to be sold in 2025. Battery capacity requirements are increasing in parallel. The IEA’s latest demand outlook shows that electric vehicles now account for nearly 90% of lithium demand, up from 64% in 2020. This concentration underscores the market’s exposure to automotive production cycles, technology adoption rates, and regional policy frameworks.

Figure 2. Lithium consumption pattern, 2016–2030. Batteries are projected to account for 94% of demand by 2030 (Credit: Lithium Harvest)

Lithium iron phosphate (LFP) chemistries have taken a larger share of new production, particularly in China, yet this shift does not reduce total lithium requirements. The kWh volume growth in EV batteries offsets differences in lithium intensity between chemistries.

Energy Storage Takes the Fast-Growth Position

Stationary storage is emerging as the second pillar of demand growth. Global grid-scale battery deployments exceeded 90 GWh in 2024, with costs for lithium-based systems expected to fall by up to 40% by 2030. BloombergNEF and other sources forecast annual storage installations to rise at a compound rate exceeding 30% in the second half of the decade. This growth supports sustained demand for lithium carbonate, particularly in LFP-based storage solutions.

Figure 3. Global gross energy storage additions by market, 2016–2030 (Credit: BloombergNEF)

Following the price correction of 2023–24, the lithium market entered 2025 with residual oversupply. Multiple mines, particularly in China, have since reduced or halted production in response to lower prices. A notable example is CATL’s suspension of operations at a major lithium mine in Jiangxi Province, equivalent to roughly 3% of global supply. The immediate impact on spot prices demonstrated the sensitivity of the market to supply adjustments.

Australia, Chile, and China continue to dominate supply, together accounting for over 80% of global production. Hard-rock mining represents two-thirds of output, with brine evaporation and direct lithium extraction (DLE) technologies making up the remainder. This concentration creates both logistical and geopolitical risk, particularly as demand projections point to potential supply deficits after 2029 if new projects are delayed.

Figure 4. Lithium production concentration by country and extraction method (Source: Lithium Harvest)

The spot market has become a critical reference point for lithium pricing in 2025. While long-term contracts remain the backbone of most supply agreements, spot transactions now play a greater role in shaping short-term expectations, particularly during periods of volatility.

The market reaction to supply adjustments earlier in the year showed how quickly spot values can shift. The rebound in July 2025, when Chinese spot prices climbed from multi-year lows, reflected not only supply discipline but also the demand trajectory highlighted by BloombergNEF, which projects energy storage installations to expand at a compound annual growth rate of 21% through 2030. Expectations of accelerating consumption are magnifying the impact of supply news, amplifying price responses even to relatively small changes in output.

Spot prices, therefore, act as a live signal of market balance. They move instantly with shifts in supply, demand, or policy, and can serve as an early indicator of sentiment. Yet they cannot be treated as a universal benchmark. Different lithium compounds carry distinct pricing structures: carbonate is increasingly tied to LFP cathodes, while hydroxide demand remains linked to high-nickel chemistries. Conversion costs, logistics, and specification differences can create wide gaps between the two.

For procurement teams, spot pricing is most effective as a directional guide when combined with structured sourcing processes. Competitive tenders and index-linked contracts, benchmarked against spot trends, allow buyers to secure defensible positions while sellers can optimise timing to capture price momentum.

Figure 5. Lithium supply, demand, and pricing for carbonate and hydroxide, 2014–2025 (Source: BMO Capitals Market)

Battery chemistry trends are reshaping lithium demand patterns. The rapid global expansion of LFP cathodes is increasing the call for lithium carbonate, while high-nickel cathodes sustain a strong market for hydroxide in applications prioritising energy density.

These chemistry shifts have procurement implications. Supply chains for carbonate and hydroxide are not fully interchangeable. Hydroxide is often produced through carbonate conversion, adding cost and creating dependencies between product markets. As LFP adoption increases, demand for carbonate will expand more rapidly, influencing extraction strategies and refining investments.

Non-battery uses, while a smaller share, remain relevant. Lithium chloride is used in air conditioning systems and as a catalyst in organic synthesis. Butyllithium plays a role in chemical synthesis and polymerisation, and lithium metal is used in specialised batteries and alloys. Although these applications collectively account for less than 10% of demand, they influence allocation decisions, particularly during tight market conditions.

Table 1. Lithium Usage Table (Credit: Lithium Harvest)

Industrial policy is reinforcing long-term lithium demand. The EU’s Fit for 55 package, the US Inflation Reduction Act, and China’s continuing EV and battery subsidies provide multi-year demand visibility for producers and converters. These measures underpin battery manufacturing expansions, securing future lithium consumption even when prices fluctuate.

However, recent market softness has prompted investment caution. Several major producers have slowed project development or scaled back refining capacity. Albemarle has mothballed its Chengdu hydroxide facility and adjusted its Western Australian operations, while other developers have delayed new mine commissioning. This restraint may stabilise prices in the near term, but it also raises the risk of supply shortages later in the decade.

Forecasts from RMIS and CarbonCredits suggest that without significant new capacity, the market could shift from surplus to structural deficit by 2029. In this scenario, tightness could coincide with peak EV and stationary storage adoption, amplifying competition for supply and increasing reliance on transparent, efficient procurement processes.

Figure 6. Lithium supply-demand forecast to 2034, showing base and high case demand scenarios and potential deficits after 2029 (Source: Lithium Harvest)

• China is the largest consumer, driven by record EV production and rapid deployment of energy storage. The country’s refining capacity dominance ensures that Chinese spot prices often set the global tone.
• Europe is accelerating battery manufacturing localisation to reduce import dependency. Strong emissions legislation and green industrial policies keep lithium demand growth on track.
• The United States is scaling battery capacity under the IRA, with parallel growth in grid-scale storage. This is drawing in both lithium carbonate and hydroxide, increasing competition in global trade flows.

These regional trends shape trade dynamics, arbitrage opportunities, and the pricing power of different markets.

The dynamics of 2025 demand, supply, and pricing call for a disciplined, data-driven approach to procurement and sales.

For Buyers

For battery manufacturers, automotive OEMs, cathode producers, recyclers, and storage integrators, the priority is to secure both volume and price flexibility. Long-term index-linked contracts provide stability, but incorporating spot-responsive volumes into the sourcing mix allows buyers to take advantage of favourable market conditions. Competitive, event-based tenders create price tension, reveal the most competitive offers, and provide documented benchmarks for internal governance.

Buyers must also validate suppliers beyond price. Compliance with specification requirements, delivery reliability, and contractual terms all have direct cost and risk implications. Transparent digital processes reduce the risk of misaligned expectations and enable faster decision-making.

Metalshub enables these strategies. The platform allows procurement teams to:

• Launch structured tenders that attract qualified suppliers
• Compare offers across currencies, Incoterms, and specifications in a standardised format
• Benchmark offers against spot prices and market indices in real time
• Track procurement performance and supplier reliability over time
• Secure compliance through auditable, transparent workflows

For Sellers

For miners, refiners, and traders, competitive sales events expand the buyer pool, drive market discovery, and can secure premiums when demand outpaces immediate supply. Demonstrating consistent quality, ESG compliance, and the ability to meet delivery schedules builds trust and pricing power.

Metalshub provides the tools to:

• Execute digital sales events targeting verified buyers
• Discover true market demand through competitive bidding
• Scale reach beyond existing customer networks
• Capture higher value by selling into the most competitive buyer segments

Lithium demand in 2025 is expanding under the combined weight of EV growth, surging energy storage deployment, and sustained policy support. Supply remains concentrated and vulnerable to disruption, and the spot market’s influence on procurement decisions is rising. Strategic execution, underpinned by transparent, data-driven sourcing, is now the differentiator for both buyers and sellers.

Those with the capability to run structured tenders, benchmark against market signals, and engage a qualified supplier network will secure both supply and commercial advantage in a sector defined by its speed of change. As lithium demand accelerates, the ability to run transparent, data-driven processes will define who secures supply and who is left exposed.

To learn more about how digital sourcing and sales processes can bring transparency and efficiency to lithium procurement, visit Metalshub’s Battery Raw Materials page or contact our team for a detailed walkthrough.