The lithium boom isn’t over, but it is currently being tested. In Q1 2026, the market shifted from growth to a more uneasy reality.
Prices have dropped, timelines are slipping, and the once dominant narrative of unstoppable demand is experiencing its first real stress test.
Towards the end of the quarter, lithium carbonate prices in China fell ¥150,000 per tonne, the lowest in a month, amid signs of a monetary pullback in battery demand.
However in late March, lithium carbonate prices in China rose ¥165,000 a tonne – representing the highest in nearly one month and gaining over 40% since the start of the year amid bullish demand expectations in the near and longer terms.
Trading Economics reports the surge in crude oil and product prices since the beginning of March supported the outlook for larger economies to favour new energy vehicles, which use batteries that take lithium as a major input.
Over the past month, the battery metal’s price fell 4.64%, but is still up 122.3% compared to a year ago. At the time of writing, lithium prices sat at ¥164,500 a tonne.
Electric vehicle sales by top Chinese manufacturer BYD also tanked 40% annually in February, a reversal from the growing trend in the previous month. Trading Economics says this raises concerns that the Chinese EV market may be slowing.
According to S&P Global, lithium-ion battery production was forecast to slow in January 2026 as orders and production normalised from the peak season. In conjunction, cathode production was forecast to decrease by 7-8% compared to December 2025.
A survey by Mysteel also revealed that China’s lithium carbonate market is likely to see a relatively balanced supply and demand dynamic. On the supply side, China’s lithium carbonate is estimated at around 88,300 tonnes in February 2026, which is a 8.2% decrease from 96,200 tonnes in January.
Mysteel says this is primarily due to refinery overhaul during the Chinese New Year holiday as well as reduced calendar days in February.
On the demand end, China’s lithium-iron-phosphate production in February 2026 was also projected to fall to 383,200 tonnes, representing a 5.48% month-on-month decline.
Together, these signals mark a turning point – forcing the market to confront a complex question. What actually underpins lithium demand from here?
WA’s supply pipelines
While demand is recalibrating, supply challenges are becoming harder to ignore.
There have been questions around delivery and permitting timelines, processing resilience, and geopolitical influence. All of these are becoming central to lithium’s story.
In Western Australia, developers and producers are continuing to push projects forward. Global Lithium Resources (ASX:GL1) recently submitted a mining development and closure plan for the Manna Project in Western Australia.
The Manna Project is the third largest resource in the Kalgoorlie lithium province and is an outcropping spodumene dominant hard-rock lithium asset. Manna contains a resource of 51.6 million tonnes @ 1% lithium oxide.
In early March 2026, Managing Director Dianmin Chen said the proposal allows Global Lithium to progress in de-risking and advancing Manna for a final investment decision.
“This detailed proposal reflects our thorough planning across the entire project lifecycle, from development through to effective closure, and acknowledges the expectations of our community partners, the Kakarra People,” Chen said.
Also in Western Australia is Core Lithium’s (ASX:CXO) Finniss Lithium Project, which is expected to reopen following the company receiving US$120 million ($170 million) in funding from Glencore Australia, InfraVia CMF Invest S.à r.l., Nebari Natural Resources Credit Fund II and LP Nebari, as previously reported.
Core Lithium also plans to undertake a $120 million capital raising to fund construction and restart operations.
Finniss is anticipated to be a low-cost, long-life brownfield lithium operation with a 214,000 tonne per year production capacity.
Western Australia has a strategic advantage in the global demand of lithium due to its endowment of mineral resources and access to skilled workers. According to Global Lithium, the state’s lithium production accounted for 47% of the global supply in 2023.
Northern ambitions
Across the northern hemisphere, lithium ambitions are accelerating. In Canada, Nano One Materials (TSX:NANO) expects to begin lithium-iron-phosphate production next year at its Candiac facility. The facility will have an increased capacity of 800 tonnes of LFP per year.
The LFP commercial facility will demonstrate the optimal production line for the one-pot process. It will be engineered using a design one, building many frameworks for replication in future multi-line production plants.
Candiac was built in 2010 by a Québec start-up Phostech Lithium. The facility emerged as North America’s sole commercial LFP plant and at the time was among the largest in the world, with a capacity of 2,400 tonnes per year through a hydrothermal process.
Meanwhile in Europe, Savannah Resources (LSE:SAV) is progressing a Definitive Feasibility Study and environmental licence compliance process in July 2026, for the Barroso Lithium Project located in Portugal.
Based on the new schedule for the study and process, Savannah expects to receive Barroso’s final environmental licence in Q3 2026. A final investment decision will also be reached by the end of this year.
Barroso is considered the largest battery grade spodumene lithium resource outlined to date in Europe and was classified as a ‘strategic project’ by the European Commission under the Critical Raw Materials Act in March 2025. The project has a lithium resource of 39 million tonnes @ 1.05% lithium oxide for 411,900 tonnes across five orebodies, as this news service reported.
Exploration surges
Exploration activity remains a hot spot, with North American emerging as a major place for lithium discoveries.
In Québec’s James Bay region, Q2 Metals (TSX-V:QTWO) is advancing its Cisco Lithium Project, targeting a transition from an early-stage explorer to resource-stage within the next nine to 10 months, as previously reported.
Cisco has an initial exploration target estimating a range of potential lithium mineralisation of 215-329 million tonnes @ 1-1.38% lithium oxide based only on the first 40 holes drilled.
During Q1 2026, the Canadian mineral explorer has been conducting an ongoing drill program focused on infill drilling within the mineralised zone, spanning 1.5km along the northeast-southwest trending strike length at Cisco.
Nearby Brunswick Exploration (TSX-V:BRW) is expanding the Anatacau Main Project, following uncovering three new high-priority lithium targets at the project, which CEO Killian Charles says is proving to be “one of the most exciting projects” in Brunswick’s portfolio.
“These high-priority targets were the result of additional compilation work in preparation for the ongoing drill program and highlight the significant exploration potential of the project,” Charles says.
“Following the drill program at Anais, Brunswick will commence a major prospecting campaign to rapidly evaluate these new targets once ground conditions permit field activities.”
This news comes following Brunswick restarting a second phase drilling program at Anatacau Main. The program, comprising 12 holes for 2,500m of drilling, aims to expand the Anais lithium discovery.
Anatacau Main is strategically located 22km east of the Anatacau West Project and Rio Tinto’s (ASX:RIO) James Bay Lithium Project, along a large-scale east-west trending deformation corridor.
A few thousand kilometres away is Venari Minerals’ (ASX:VMS) Red Mountain Lithium Project in Nevada.
As previously reported, the company revised its exploration target range for Red Mountain. The target ranges between 2,020 million tonnes to 2,690 million tonnes at an average grade range between 1,000 and 1,300 parts per million (ppm) lithium or between 0.53% and 0.69% lithium carbonate equivalent (LCE) for contained lithium between 10.7 and 18.6 million tonnes LCE.
The exploration target follows a maiden resource estimate of 500 million tonnes @ 1,139ppm lithium for 3.03 million tonnes of contained LCE, sitting in the inferred category.
CEO Matthew Healy previously said that delivering the resource is a milestone which propels the company to the forefront of the ASX-listed explorers and establishes Red Mountain as “one of the largest new lithium resources in the Americas and a compelling development opportunity”.
“Red Mountain exhibits all the key characteristics that we look for in a large-scale mineral asset – scale, extensive mineral endowment, and an accessible high-grade zone that can be targeted for initial mining,” Healy said.
Sustainability changes the narrative
Beyond mining and exploration, the lithium sector is undergoing a structural shift towards sustainability and circularity.
In Canada, St-Georges Eco-Mining (CSE:SX) is advancing the development of domestic lithium processing capabilities, supported by federal funding and partnerships with Coalia.
To date, the company has processed three tonnes of spodumene concentrate at leaching phase, with pilot operations progressing as planned.
Natural Resources Canada is supporting Coalia’s lithium pilot plant project with a $4 million investment through the Critical Minerals Research, Development and Demonstration program.
Under a subsidiary – EVSX Corp – St-Georges is developing closed-loop solutions to extract all of the value of used domestic, commercial and electric vehicles batteries. EVSX works with battery chemistries including nickel-cadmium, alkaline, lithium-iron-phosphate, and lithium-ion, with up to a 98% recovery rate.
At the same time, research institutions and universities are showcasing what sustainable lithium recovery can look like.
Researchers from Monash University have developed a method to recover high-purity nickel, cobalt, manganese, and lithium from spent lithium-ion batteries using a mild, sustainable solvent, as Mining.com.au reported.
Monash University’s process offers a more safe and environmentally friendly alternative to traditional high-temperature or chemical-intensive recycling methods. Current recovery methods are often limited and rely on high temperatures or hazardous chemicals to extract only some elements.
Globally, around 500,000 tonnes of spent lithium-ion batteries have already accumulated and about 10% of spent batteries are fully recycled in Australia, as reported by the Monash University.
Recent research by the university also found that the pre-treatment stage in lithium-ion battery recycling can account for up to 38% of the environmental impact of recycling and affects material losses, depending on the battery type and processing method.
Pre-treatment is the first processing step, turning spent batteries into ‘black mass’, before valuable metals such as lithium, nickel, and cobalt can be extracted, yet it is often ignored in recycling strategies.
Monash University says the insights provide critical guidance for policymakers and industry, helping ensure recycling systems are efficient, effective, and sustainable.
In Q1 2026, the lithium market entered into a new phase, where volatility and complexity became the norm.
Demand is no longer a straight line and supply is no longer simply a race to scale. The battery metal’s success is increasingly dependent on execution, resilience, licencing and permitting, and resource size.
The boom is not over, but it is evolving.
Write to Aaliyah Rogan at Mining.com.au
Images: iStock, Global Lithium, Q2 Metals, Brunswick Exploration, St-Georges Eco-Mining & Monash University
