Albemarle’s demand outlook is rising with the rise of energy storage

Storage space is in the spotlight

Global lithium demand reached 1.6 million tons in 2025, up more than 30 percent year-over-year and in line with Albemarle’s previous projections. Growth in demand exceeded supply, causing inventories to shrink and prices to rise toward the end of the year.

By 2026, Albemarle now expects global lithium demand to rise to between 1.8 million and 2.2 million tons – a growth of 15 to 40 percent – ​​driven by both the adoption of electric vehicles and the accelerating deployment of stationary energy storage systems (ESS).

While global sales of electric vehicles rose 21 percent by 2025, energy storage was the highlight. Demand for ESS increased by more than 80 percent year-on-year, with strong growth in China, North America and Europe.

China, which accounted for about 40 percent of ESS deliveries, saw demand increase by 60 percent. North American shipments increased by 90 percent, driven by network stability needs and rising electricity consumption tied to data centers and artificial intelligence. European transportation has more than doubled as countries expanded their renewable energy sources and sought greater energy security.

Demand outside the three major regions grew by 120 percent and represented more than 20 percent of global ESS deliveries, with Southeast Asia, the Middle East and Australia emerging as key growth markets.

The shift is already visible in Albemarle’s financial figures. By 2025, energy storage volumes reached 235,000 tonnes of lithium carbonate equivalent, up 14 percent year-on-year and above the high end of the company’s guidance ranges.

Fourth-quarter energy storage net sales rose 23 percent from a year earlier, while segment EBITDA rose 25 percent, supported by higher lithium prices and cost improvements.

CFO Neal Sheorey said Albemarle’s updated 2026 scenarios reflect both price and operating gains.

Cost discipline, portfolio reset

After weathering a sharp decline in lithium prices over the past two years, Albemarle has focused on strengthening its balance sheet and lowering its cost base.

By 2025, the company will have achieved approximately $450 million in run-rate cost and productivity improvements and is targeting an additional $100 to $150 million by 2026.

Albemarle also announced it will shut down operations at its Kemerton lithium hydroxide plant in Western Australia, citing a structural cost differential between Western and Chinese conversion assets.

“There is a divide there between China and the West,” Masters said, pointing to higher labor, energy and waste management costs in Australia. The plant idling is expected to improve adjusted EBITDA from the second quarter onwards, without impacting sales volumes.

At the same time, Albemarle is streamlining non-core assets.

The company completed the sale of its stake in the Eurocat joint venture in January and expects to complete the sale of a majority stake in its refining catalyst business in the first quarter. Collectively, the transactions are expected to generate approximately $660 million in pre-tax proceeds.

“We are committed to maintaining our investment grade credit profile,” Masters said, adding that deleveraging and disciplined capital allocation remain priorities.

Growth with limited new capital

Despite scaling back large-scale capital expenditures, Albemarle expects a compound annual growth rate of approximately 15 percent in energy storage sales volumes over five years, building on a 25 percent CAGR over the past four years.

Gradual expansions at the Greenbushes mine in Australia, yield improvements at the Salar de Atacama in Chile and higher utilization rates at the Wodgina joint venture are expected to support growth with minimal additional capital.

Looking ahead, Masters says the company is better positioned to navigate lithium’s still-maturing cycle.

“We’ve been through two cycles since the advent of electric cars,” he said, describing the market from a commodity perspective early in its development.

With stationary storage now emerging as a second structural pillar of demand alongside electric vehicles, Albemarle’s revised outlook suggests that the next phase of the lithium market will be determined as much by grid resilience and energy security as by the electrification of transportation – broadening the demand base for years to come.

The lithium price will rebound sharply in early 2026

Lithium prices have soared since early 2026, underscoring the market’s renewed volatility.

According to Fast marketsspot-quality lithium carbonate in the marine market has risen from about $11 per kilogram in early December to more than $16 per kilogram in early January, an increase of almost 50 percent in just a few weeks.

The rally was driven by tighter supply, including delays in the reopening of CATL’s (SZSE:300750,HKEX:3750) Jianxiawo lepidolite mine and maintenance at other production facilities, in addition to aggressive restocking related to long-term contract negotiations.

Speculative buying has amplified this move, with bullish sentiment and geopolitical risk increasing momentum. At the same time, thin spot liquidity reflects a cautious market as buyers and sellers hesitate to engage amid rapid price swings.

Spodumene prices followed suit, rising above $2,000 per tonne in January, a level not seen since October 2023. The recovery has improved margins for Australian producers, many of whom have curtailed production as prices fell below $900 a tonne. Continued pricing at current levels could lead to a wave of mine restarts, potentially easing the supply crunch later this year.

Still, Fastmarkets warned that prices may be ahead of fundamentals.

“Lithium prices appear to have advanced ahead of fundamentals, driven by speculative buying, bullish sentiment and a backdrop of heightened geopolitical risk,” wrote Paul Lusty. “The most important thing we can do is brace for more volatility.”