Wall Street Eyes Lithium As Battery Storage Demand Poised To Spark New Upcycle

Commodity desks at Goldman Sachs, UBS, Citigroup, and Bernstein all see lithium demand poised to surge after the electric vehicle boom-and-bust cycle. This time, however, the growth engine is not EV batteries. Instead, analysts point to energy transition systems, such as the rapid buildout of energy storage batteries on power grids, as the next pillar of demand for the battery metal.

UBS analyst Josh Reed provided clients with a 2026 outlook this morning, saying that his mining team expects “copper, aluminum, and lithium to outperform, benefiting from supply constraints, energy transition, and AI/defense exposure.”

“They remain constructive on gold but see more upside in selected industrial metals, and do not expect a broad-based improvement in industrial metals,” Reed noted.

Earlier this week, UBS analyst Marcus Zhang told clients that battery storage system demand is expected “to lift lithium prices materially in 2026–2028 (up to +150% vs. prior).”

Here’s more from Zhang:

UBS Research has lifted near-term lithium price forecasts for 2026-2028 (up to +150%) on stronger Battery Energy Storage Systems (BESS) demand. As BESS takes a meaningfully larger share of global battery demand through the decade, the lithium market is expected to shift into deficit from 2026, with tighter balances reinforcing a stronger near-term price and improving revenue visibility for producers. While incremental supply is likely to respond to higher prices, the timing gap between investment decisions and delivered tonnage suggests a multi-year period of tightness, moderating only as capacity ramps.

In China, lithium carbonate futures have staged a bounce in H2 2025.

Separately, Goldman analysts led by Lavinia Forcellese reached the same conclusion: the core driver of lithium demand will be energy storage systems (read the report).

Last month, Tesla CEO Elon Musk said that the US could effectively double its usable electricity output simply by adding large-scale batteries to the grid.

Elon Musk: Just by adding stationary batteries to the grid, we could double the electricity production in the United States.

“If you look at the total U.S. power generation capability, it’s roughly a terawatt, but the average power usage is less than half a terawatt. That’s… pic.twitter.com/aKyg4kFqFG

— ELON CLIPS (@ElonClipsX) November 11, 2025

UBS’ Zhang provides clients with trade ideas on the incoming energy system boom:

Implied vols across the optionable lithium miners (PLS, IGO, MIN) are elevated. From the derivatives perspective, call-spread collars screen more attractive to express upside.

Trade Idea Examples (indicative pricing):

PLS: Buy 16Feb26 110-130% call spread and fully fund it by selling 89% put, 50 delta.

IGO: Buy 16Feb26 110-127.5% call spread and fully fund it by selling 90% put, 49 delta.

MIN: Buy 16Feb26 110-130% call spread and fully fund it by selling 90% put, 52 delta.

Lithium’s upcycle driven by industrial-sized power grid batteries comes as no surprise, given tailwinds from grid upgrades and AI, while the Federal Reserve’s shift back toward “QE Lite” has sparked a broader surge in metals.