IEA Outlook Highlights Strong Growth in Demand for Critical Battery Materials

The International Energy Agency (IEA) released its Global Critical Minerals Outlook 2026, documenting continued strong growth in demand for critical battery materials essential to the energy transition. According to the report's market overview (IEA), global battery demand grew by over 35% in 2025, surpassing 1.5 TWh, with battery storage emerging as a major driver alongside electric vehicles.

Demand for key energy minerals, including copper, battery materials and rare earths, continued to expand strongly in 2025. This was driven by their use in batteries for electric vehicles and energy storage, electricity infrastructure such as grids, wind turbines and solar PV, and permanent magnets. Deployment of renewables, grids and electric cars expanded, with solar PV reaching record levels. As a result, demand for key energy minerals has grown at close to 10% per year on average in recent years, significantly outpacing base metals growth of around 1% annually. Lithium demand has been particularly strong, increasing by around 25% per year on average over the past two years. Across key energy minerals, the energy sector drove on average around 75% of demand growth in 2025, up from 70% in 2024, the IEA stated (IEA market overview).

Battery material prices recovered in 2025 and early 2026 after earlier declines. Lithium prices more than doubled amid strong demand from energy storage applications and constrained supply, while cobalt prices rose by around 130%, largely due to export restrictions imposed by the Democratic Republic of the Congo, according to the executive summary (IEA).

Despite the demand growth, critical mineral investment declined by 9% in 2025, ending several years of increases. Battery metals saw the sharpest pullback, with capital spending falling by more than 20%—the largest decline in over a decade—and lithium companies cutting investment by around 40%. This reflected shifting battery chemistry preferences toward lithium-iron-phosphate, oversupply-driven price weakness earlier, and policy uncertainty. By contrast, copper-focused companies increased spending by 8%. Exploration spending also declined by more than 10%, with drops of around 45% for lithium and nickel (IEA executive summary; Battery Technology).

Supply concentration in refining edged higher for most minerals in 2025. The top refining countries accounted for over three-quarters of total growth in refined supply over the past two years. Gaps between projected demand and anticipated supply have narrowed somewhat for copper and lithium compared with prior assessments, but deficits are still set to persist through 2035. For copper, the projected shortfall in 2035 has narrowed to around 25%. A supply gap has emerged for cobalt due to the DRC's export quota. The IEA noted that export controls have turned concentration risks into realities, with China announcing controls on battery supply chain materials including cathode materials and graphite anode materials in 2025. Full disruption of battery-grade graphite trade could put over USD 300 billion per year of downstream production outside China at risk (IEA executive summary; Reuters).

Looking ahead, the report projects that energy technologies will remain the dominant driver of demand. By 2040, demand for lithium is expected to rise threefold, while nickel, graphite and rare earths are projected to grow by 50% to 90%, according to coverage of the outlook (Battery Technology). The IEA emphasised the need for diversified supply chains, noting imbalances where planned cathode production capacity is only about one-third of projected lithium mining capacity. Public finance commitments in advanced economies reached around USD 65 billion in 2025 to support investment.

IEA Executive Director Fatih Birol stated that vast amounts of economic value depend on relatively small volumes of critical minerals whose supply chains remain highly concentrated and vulnerable (Battery Technology; Reuters).