23/12/25
Viewpoint: The coming lithium cycle
London, 23 December (Argus) — The global lithium market is geared up to enter a
new growth cycle as it navigates away from the choppy waters of 2025 and rides a
wave of energy and national security-linked demand. Lithium prices have fallen
steadily since the highs reached at the end of 2022, reaching a low in mid-June
this year of below $7,500/t cif China for lithium carbonate. Fears of
oversupply, uneven electric vehicle (EV) uptake and trade tariffs weakened
sentiment over the two-and-a-half year period. But prices have since recovered.
The market was at $11,500-11,600/t cif China on 9 December. And a sustained new
cycle of price increases is now expected, driven by increased build-out of
battery energy storage system (Bess) — which many expect will surpass demand
from EVs by the late 2020s. Increased scrutiny of lithium supply chains from
eco-conscious buyers and growing engagement in the market by western governments
may also create an emphasis on fairer pricing and challenge monopolistic
practices. EV adoption drove the last lithium cycle, but this latest cycle will
rely on a few new sources of demand. Fast growth in solar power installations,
artificial intelligence (AI) data centres, autonomous machines and humanoid
robots will all contribute to higher demand for energy storage batteries,
alongside continued growth in EV use. Record solar installations across Europe,
the US and Asia-Pacific are driving growth in Bess deployments. As grids adapt
to a higher penetration of renewable energy sources, storage is becoming
essential to balance the intermittency of these sources, and to stabilise
frequency. And operators of AI data centres are exploring on-site lithium-ion
storage not just for back-up supply but also to manage peak demand and reduce
pressure on energy markets. Some hyper-scale facilities now rival small cities
in terms of energy use, creating a new, sustained source of industrial demand
for lithium. Humanoid and autonomous robots are likely to become a meaningful
new source of lithium demand in the next decade. Advances in AI, sensors and
actuators are rapidly moving robots out of controlled industrial settings and
into logistics, healthcare, defence, construction and domestic services. The
global humanoid robotics market could grow into a $5 trillion industry by 2050,
reflecting not just hardware sales but software, services and supporting supply
chains, investment bank Morgan Stanley said. "Humanoid robots will be far bigger
than cars. Ultimately, I think there will be more humanoid robots than people,"
EV company Tesla chief executive and founder Elon Musk said at the launch of the
Tesla Optimus 3 robot this year. Unit numbers are currently small but even
conservative forecasts suggest the sector will create material battery demand. A
typical humanoid robot is expected to carry a lithium-ion battery pack of
roughly 2–5kWh, depending on size, payload and duty cycle — similar to the
capacity of a small electric scooter or home storage module. At scale, fleets of
robots operating continuously will require frequent charging, replacement packs
and stationary back-up systems, creating second-order demand for lithium beyond
transport. As automation increasingly becomes a national security priority,
humanoid robotics could evolve from a niche application into a structurally
important driver of long-term lithium consumption. Price floors and tightening
standards Policy, finance and geopolitics are increasingly shaping lithium
prices, in addition to demand growth. After a few years of extreme volatility,
the industry is reaching a consensus that some form of price stability is needed
to build the next wave of lithium supply. This is already reflected in contract
structures, government intervention and new efforts to formalise trust and
transparency across the supply chain. The growing prevalence of price floors in
long-term offtake agreements is one of the clearest signals. Producers,
converters and financiers are moving away from pure spot exposure and towards
hybrid contracts that include minimum pricing thresholds to underwrite project
economics. Long-term agreements increasingly include floor mechanisms designed
to protect projects during downturns, with some contracts reportedly triggering
these floors during the 2024-25 slump, a major industry participant said. This
shift reflects a need to make lithium projects financeable in a world where
capital spending is more controlled and geopolitical developments are more
intrusive. Governments are also becoming more explicit in their role. The ideas
of state-backed price floors or strategic offtake have entered mainstream policy
discussions in Australia, with senior officials openly acknowledging that floor
prices are one tool among many to support domestic supply chains. The logic is
that if lithium is treated as strategic infrastructure — on par with energy
grids or defence manufacturing — then markets alone may not be trusted to
deliver stable investment signals. At the same time, the industry is attempting
to address a deeper credibility issue. The emergence of initiatives such as the
International Lithium Association's PCF stamp reflects a push to create a
recognised "mark of trust" for lithium products, particularly for buyers facing
mounting regulatory and environmental, social and governance scrutiny. Over
time, this could contribute to a two-tier market, where verified, low-carbon and
traceable lithium commands a structural premium over unverified material. While
not a price mechanism in itself, such certification frameworks may indirectly
support higher effective price floors by narrowing the pool of acceptable supply
for western buyers. These forces suggest a lithium market that is less cyclical
and more structurally managed. Trade tensions, national security concerns and
industrial policy are encouraging longer contracts, government-backed demand and
pricing mechanisms that reduce downside risk. The result may not be a return to
the extreme price highs of 2022, but it could see the emergence of a higher and
more resilient pricing baseline shaped as much by policy and trust as by supply
and demand. Send comments and request more information at
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