Lithium Market Flashes Bullish Signal on Energy Storage Boom
J.P. Morgan forecasts 50% growth in battery storage shipments in 2025, signaling a market inflection point despite soft spot prices.
The lithium market, battered by a prolonged price slump, is showing strong signs of a forward-looking recovery, not from electric vehicles, but from the rapidly expanding energy storage sector.
While physical lithium carbonate spot prices have remained soft, futures markets are flashing bullish signals, pointing to a significant market tightening ahead. The rally in futures is underpinned by powerful new demand forecasts from the grid-scale battery sector. Underscoring this shift, analysts at J.P. Morgan have projected a massive 50% surge in global shipments for Battery Energy Storage Systems (BESS) in 2025.
This explosive growth is repositioning the entire lithium demand landscape. The investment bank anticipates the BESS sector will account for nearly 30% of global lithium consumption by 2026, a dramatic increase from its current share. This structural shift is forcing a re-evaluation of supply and demand models that have been heavily weighted toward the electric vehicle market.
"The 'energy storage' theme is becoming a key driver for lithium," a recent J.P. Morgan research note stated, highlighting the sector's escalating importance. The bank's analysis suggests this new demand vector will be substantial enough to push the lithium market into a deficit.
The divergence between weak spot prices and rallying futures, particularly in China, tells a tale of two markets. The current physical market is still digesting an oversupply that has plagued it for over a year, with spot prices for battery-grade lithium carbonate seeing declines in December. However, Chinese futures prices rallied past CNY 94,000 per tonne to an 18-month high during the same period, according to data from Trading Economics.
This forward-looking optimism is rooted in the critical role BESS plays in the global energy transition. These large-scale battery installations are essential for stabilizing power grids and storing intermittent energy from solar and wind farms. As renewable energy capacity grows, so does the need for reliable storage, creating a new, inelastic source of demand for lithium-ion batteries.
Analysts now expect the energy storage boom to fuel a broader lithium recovery. The market is anticipating further tightening as BESS deployments accelerate globally. J.P. Morgan's report notes that many idle lithium production facilities are unlikely to restart without higher prices, suggesting that the current supply glut could evaporate quickly once the BESS-driven demand fully materializes.
The EV market remains a significant consumer of lithium, but its recent growth slowdown has highlighted the need for demand diversification. The emergence of BESS as a co-equal driver provides that, offering a more robust and predictable demand profile for lithium producers who are now watching the energy sector as closely as the automotive industry.