Warnings are mounting that the lithium battery industry could be heading towards a supply crunch by the end of the decade, despite a dramatic recovery in prices over the past year, according to a recent report by Sana Ur Rehman, financial market analyst for EBC Financial Group.

Analysts now believe the biggest challenge facing the battery sector is not today’s market conditions but the consequences of a prolonged investment slowdown that followed lithium’s spectacular price collapse between 2023 and 2025. 

According to forecasts from Wood Mackenzie, supply deficits could emerge as early as 2028, raising concerns about battery costs, EV affordability and the pace of the global energy transition.

The roots of the problem lie in lithium carbonate’s collapse from around $64,000 per tonne in late 2022 to less than $10,000 per tonne by mid-2025, says Sana. While the crash eliminated oversupply, it also discouraged companies from approving the billion-dollar investments needed to develop new mines. 

Today, prices have recovered sharply, reaching around $24,700 per tonne in China, but the damage to the future supply pipeline has already been done.

A new lithium project typically takes five to seven years to move from final investment decision to commercial production. That means mines needed to supply the market between 2028 and 2030 should have been approved during the 2023-2025 period. Instead, many projects were delayed, suspended or abandoned as developers struggled to justify investment at depressed prices.

Major producers cut spending aggressively. Albemarle mothballed part of its Kemerton operation in Australia and reduced capital expenditure, while Core Lithium suspended production at its Finniss mine for 18 months. Across South America, development-stage projects were deferred as investors stepped back from the sector. 

Although some idled operations are now restarting, industry experts warn that bringing existing mines back online is not enough to close the anticipated supply gap.

The concern is that demand growth continues to accelerate. Global EV sales rose 22% in 2025, while demand for battery energy storage systems is also expanding rapidly. 

Analysts estimate that EV batteries alone will require around 3 million tonnes of lithium carbonate equivalent annually by 2030 — that’s double current global supply levels.

Governments are already responding to concerns about future scarcity. The US launched its $12 billion Project Vault strategic minerals initiative earlier this year, while Zimbabwe accelerated a ban on raw lithium concentrate exports in a move designed to encourage domestic processing. 

Such actions underline growing concerns over supply security and access to critical minerals.

BloombergNEF estimates battery pack prices averaged $108/kWh in 2025, helping bring electric vehicles closer to price parity with conventional cars. However, analysts now warn that sustained lithium shortages could push raw material costs sharply higher, reversing years of battery cost reductions. Research by the International Council on Clean Transportation suggests that a severe mineral price shock could delay EV price parity in the US by two to three years.

For the battery industry, the challenge is now clear reckons Sana. Restarting mothballed capacity may provide short-term relief, but it will not solve the structural shortage expected later this decade. 

Without rapid investment in new projects, the lithium required to support global EV and energy storage ambitions may simply not arrive in time.