Lithium Outlook 2026: Overcapacity Fades, Shortage Returns?

By 2026, China’s lithium resource production capacity will surpass Australia’s to become the world’s largest. Domestically, mature Qinghai salt-lake operations remain the backbone of supply; Tibet’s salt lakes have entered large-scale construction; Jiangxi mines are stalled due to mining permit issues; and Sichuan and Hunan mines have taken over as the primary regions for capacity expansion. Overseas, the supply surge from the previous round of capital expenditure has largely run its course, and the industry is now entering a preparatory phase for the next investment cycle. During this period, numerous projects—constrained by financing difficulties—have changed hands again, with Chinese-led projects generally demonstrating faster execution feedback than foreign-led ones. However, the U.S. National Security Strategy (NSS) newly emphasizes strategic resources in the Americas and Africa, deepening the ‘resource curse’ in peripheral countries. Compared to mere shifts in supply figures, geopolitical and operational supply disruptions from overseas resources are expected to rise significantly versus prior years. Below, we analyze developments region-by-region. Consumption Note: In the charts below, each resource is summarized concisely. Focus primarily on the color-coded sections: green blocks denote projects ramping up in 2025 or scheduled for commissioning in 2026; red blocks indicate shutdowns, output reductions, or high-risk zones; brown blocks represent projects potentially restartable. All figures shown reflect nameplate capacity—not actual output—since commissioning timelines, commissioning ramps, and other factors mean realized production will fall short of capacity. Capacity–output discrepancies will be addressed collectively later. Australian Mining Region During the prior lithium price downturn, Australian miners aggressively pursued cost reduction and efficiency gains—including mining higher-grade zones, upgrading equipment to boost recovery rates, and cutting capital spending. Aside from three shuttered mines, financially strained Mineral Resources Limited (MRL) was forced to sell 30% of its lithium business to South Korea’s POSCO Holdings. Australia’s sole new lithium capacity slated for 2026 is Greenbushes’ Phase III project (65,000 tonnes), originally planned back in 2018. Market attention instead centers on potential restarts of previously idled mines during the current upward price cycle. Yet stable lithium prices above the restart threshold constitute only one necessary condition—the actual restartable volume will fall short of total idled capacity. The most likely restart candidate among idle Australian assets is Pilbara Minerals’ high-cost Ngungaju project (17,000 tonnes). If approved, PLS could deliver the fastest Australian restart timeline—approximately four months. Each of the three shuttered mines faces distinct hurdles: Bald Hill underwent an arduous cycle of restarting in 2023 only to halt operations again in 2024; its restart hinges on MRL’s operational pressures. Finniss requires fresh financing, lengthening its restart path. Mt Cattlin has exhausted its ore body and remains up for sale. Notably, Rio Tinto—once a major lithium bet—replaced its CEO amid financial strain from the lithium downturn. The company has since restructured: lithium operations were merged into its aluminum division; lithium capex is under full reassessment; and non-core assets are being divested. Future lithium investments will focus on Argentina’s Rincon project and one of two Canadian mines. South American Mining Region Argentina’s prior-cycle capital expenditures have fully materialized into supply releases by 2025, placing the country squarely in the preparatory phase for its next investment wave. Under Argentina’s RIGI investment incentive program, most upcoming projects will adopt Direct Lithium Extraction (DLE) technology—to reduce freshwater consumption and improve extraction efficiency. Yet DLE remains at an exploratory stage across South America’s diverse mining environments: each brine lake demands a bespoke process, and no proven, scalable technology yet enables rapid, large-scale deployment. For instance, both Ganfeng Lithium and Rio Tinto have built small-scale pilot lines.

How should we interpret the recent sharp surge in lithium carbonate prices?

In recent years, the lithium industry has faced severe headwinds as new supply continued flooding the market. By mid-2025, lithium prices had plunged to their lowest level since early 2021. Although signs of market recovery emerged thereafter, the path forward into 2026 remains obstructed by two key challenges: first, China’s persistent domestic supply expansion aimed at meeting internal demand; second, escalating global geopolitical tensions and protectionist policies spurring investment in new projects elsewhere. Moreover, industry analysts question whether markets have overestimated emerging demand drivers—such as energy storage systems (ESS). 1. Chinese enterprises expanding control over global resources By 2027, China’s domestic lithium output is projected to account for 32% of global production, while overseas projects controlled by Chinese firms will contribute another 18%. Combined, Chinese entities will command 50% of global lithium supply—up from roughly 35% five years ago. Of the remaining 50%, nearly two-thirds consist of spodumene concentrate, which must be refined into lithium chemicals—most of whose refining capacity resides in China. Chinese investment focuses heavily on Argentina and Africa. In Africa, Zimbabwe best exemplifies Chinese clout: over the past three years, its lithium output has surged unprecedentedly—from less than 10,000 tonnes LCE annually before 2023 to over 150,000 tonnes LCE projected for 2025, equivalent to roughly one-third of Australia’s output. A string of new mines have come online across Zimbabwe and the broader African continent via Chinese investment. Ganfeng Lithium invested heavily in Mali, bringing the Goulamina mine into production; Zijin Lithium is constructing the Manono Northeast mine in the Democratic Republic of Congo; and multiple other Chinese firms are reportedly active in developing new lithium frontiers in Nigeria. 2. Direct Lithium Extraction (DLE) and Argentina’s RIGI investment incentives begin bearing fruit Among the world’s top five lithium-producing countries, Argentina is forecast to post the highest supply growth this year—over 60%—driven by several proprietary DLE projects gradually scaling up output. Rio Tinto has become a leading participant and investor in Argentina through a series of acquisitions. In 2026, its Fenix expansion (employing DLE) will commence operations, and its $2.5 billion Rincon project—utilizing selective adsorption DLE—will break ground. Ganfeng Lithium and Lithium Argentina plan to release a technical report on the Pozuelos Pastos Grandes (PPG) project in 2026, announcing their intent to deploy a hybrid DLE process flow. This is the final year of the RIGI program, which offers successful applicants corporate tax exemptions, elimination of the 4.5% export tariff, and phased removal of foreign exchange conversion obligations by Year Four. 3. Breaking supply-chain barriers: growing complexity in the lithium intermediates market As some emerging producers strategically target lithium chloride and lithium sulphate as intermediate products, the lithium supply chain is inevitably becoming more complex.

Rio Tinto opens $1.4 billion lithium expansion in Argentina

3 days ago

Rio Tinto inaugurated two new lithium projects in Argentina with a $1.4 billion investment, adding 25,000 tonnes of annual capacity. This expansion supports their goal to reach 200,000 tonnes of production annually by 2028.

Investing.com

2026-01-09

Rio Tinto and Glencore Explore Merger to Form Global Mining Giant

2026-03-25

Rio Tinto CEO: Merger with Glencore Unviable, Simandou Development Requires Cooperation

2026-10-27

Rio Tinto Proposes 56% Pay Jump for CEO as Mining Sector Fights for Talent

2026-10-27

Rio Tinto Considers Plan to Boost CEO Bonus Package By 56%

2026-10-28

Rio Tinto opens $1.4 billion lithium expansion in Argentina

Rio Tinto opens $1.4 billion lithium expansion in Argentina

FAQ