Lithium Prices Underestimate Real-World Demand, Leading to Potential Dramatic Correction

Lithium prices may not reflect real-world demand trends, potentially leading to a correction. Despite recent growth in EV adoption and battery storage deployment, challenges remain due to affordability issues. Lithium miners warn of underestimated demand, with Albemarle returning to profit after cost cuts and Patriot Battery Metals' CEO predicting lithium demand will exceed expectations. Battery storage costs remain high, hindering mass adoption.

Lithium prices, despite recent growth in electric vehicle (EV) adoption and battery storage deployment, may not accurately reflect real-world demand trends. This discrepancy could lead to a potential correction in the market, according to industry experts and lithium miners.

Last year, lithium prices were driven down by oversupply, particularly in China. However, recent warnings from miners suggest that the current outlook for lithium demand may be underestimated. Albemarle, one of the world's top lithium producers, reported a surprise second-quarter profit in 2025, helped by sustained demand and cost cuts [4]. The company's net sales came in at $1.33 billion during the April-June period, 7% lower than the previous year but still above analyst expectations [4].

Ken Brinsden, CEO of Patriot Battery Metals, recently warned that lithium demand may exceed expectations, particularly in the stationary energy storage market. He cited the underestimation of solar application rates and the potential for the stationary energy storage market to grow significantly larger than the EV market [1].

Despite the growth in EV adoption and battery storage deployment, challenges remain, particularly in affordability. Battery storage costs have fallen significantly over the years, but large-scale installations still require substantial investment and land [3]. The UK's National Energy System Operator (NESO) estimates that the country will need 50 gigawatts (GW) of energy storage power capacity and nearly 200 gigawatt-hours (GWh) of storage by 2050, highlighting the need for further investment and innovation [3].

The International Energy Agency (IEA) has also warned of potential lithium shortages in the future. The agency noted that most of the lithium mined today is located in parts of the world with challenging climates, and new mines take 16 years to begin production [1]. This supply anxiety adds to the demand concerns and could lead to a shortage of lithium, potentially slowing down the energy transition.

Moreover, POSCO Argentina S.A.U. has signed a letter of intent to acquire the Hombre Muerto North Lithium Project, Sophia 1, 2, and 3, and the Hydra X and Hydra XI concessions from Lithium South Development Corporation (TSXV:LIS) for $62 million. This acquisition could help address supply concerns and provide a more stable source of lithium [2].

In conclusion, while lithium prices may not currently reflect real-world demand trends, the potential for a correction looms. Investors should closely monitor the market for signs of demand exceeding expectations and consider the challenges in battery storage affordability and supply.

References:
[1] https://oilprice.com/Energy/Energy-General/Lithium-Looks-CheapBut-Demand-May-Explode.html
[2] https://www.marketscreener.com/news/posco-argentina-s-a-u-signed-a-letter-of-intent-to-acquire-hombre-muerto-north-lithium-project-sop-ce7c5fdcd88bf126
[3] https://www.edie.net/consortium-of-banks-backs-220m-uk-battery-storage-expansion/
[4] https://www.reuters.com/business/energy/albemarle-posts-surprise-second-quarter-profit-lithium-demand-shares-surge-2025-07-30/