Australia’s lithium industry is entering an exciting period. Global demand for lithium is rising sharply, electrification is accelerating, and Australia’s hard-rock lithium producers are perfectly positioned to benefit. From rising export earnings to operational leverage and selective growth opportunities, the fundamentals are compelling.
We’ve captured the full story in a detailed report, including:
- Why lithium demand is expected to grow more than fivefold by 2040
- How Australia’s producers are turning efficiency into profit
- Key ASX lithium stocks poised to benefit from FY26 market conditions.
We See Strong Long-Term Demand Keeping Australia in the Spotlight
Australia’s lithium sector is entering an exciting period. Global demand for lithium continues to rise sharply as the energy transition accelerates. Lithium demand is expected to grow more than fivefold by 2040, and batteries alone will account for 94% of total consumption by 2030.
For Australia, which supplies most of the world’s hard-rock lithium, these trends give the sector a clear advantage and a strong foundation for growth.
Source: Australia Government, Export Finance Australia (2025) [1]
Recently, lithium carbonate prices in China climbed to CNY 79,000 per tonne in October 2025. While some of this rise reflects seasonal restocking and inventory adjustments, the underlying fundamentals remain strong.
The global surplus in 2024 is expected to narrow over the next two years, potentially moving into a small deficit by 2026. We see this as a sign that Australian producers are well-positioned to benefit from both cyclical and structural improvements in the market.
We also expect export earnings to grow from $4.6 billion in FY25 to $6.6 billion by FY27, supported by annual production growth of more than 7%. Companies like Pilbara Minerals are already showing how operational efficiency can turn rising prices into substantial margin gains.
Looking ahead to FY26, we anticipate some price swings, but we also see significant opportunities. Market conditions are likely to tighten in the second half of the year, creating space for disciplined producers to capture value.
We are focusing on established players such as Pilbara Minerals (ASX: PLS), Mineral Resources (ASX: MIN), and IGO Limited (ASX: IGO). These companies have shown resilience during previous downturns and are ready to benefit from improving market conditions.
At the same time, emerging producers like Liontown Resources (ASX: LTR) are moving into production with strong assets and secured off-take agreements. This combination of stability and selective growth makes FY26 an exciting year for investors who are thinking strategically.
Electrification Continues to Drive Demand Across Vehicles and Energy Storage
Electric vehicles remain the primary driver of lithium consumption. Sales grew 28% in 2024 and are expected to exceed 20 million units in 2025. EVs alone account for over 85% of battery demand, and utility-scale Battery Energy Storage Systems are providing an additional pillar of demand, supporting the market through automotive cycles.
We also see demand shifting geographically. China, which accounted for 60% of global battery demand in 2024, is expected to fall below 50% by 2030 as the U.S., Southeast Asia, India, and Brazil accelerate their adoption of EVs. We see this as an opportunity for Australia to diversify its customer base and expand downstream processing, capturing more value in new markets.
Supply Rebalancing Supports a Positive Outlook
The market experienced a period of oversupply, with global mine output increasing 192% between 2020 and 2024. That created a large surplus. We are encouraged that the supply-demand balance is gradually rebalancing, which provides a favourable backdrop for disciplined producers to increase margins and grow sustainably.
We also see that Australian producers are focusing on operational efficiency rather than overextending production. This approach allows them to capture more value as the market tightens over the medium term.
Policy and Geopolitics Provide Additional Tailwinds
High financing costs in Western markets make disciplined growth more important, and the concentration of refining capacity in China, around 70% of critical minerals, highlights the need for diversified supply chains. Western initiatives, such as incentives for non-Chinese downstream processing, strengthen the position of Australian producers.
We see Australia’s high-quality spodumene concentrate as essential for these emerging processing facilities.
Recent Price Moves Are Encouraging
Positive Momentum in Q3 and Q4 2025
Lithium prices have rebounded in the second half of 2025, with lithium carbonate in China reaching CNY 79,000 per tonne in October. Seasonal restocking and steady production of battery-grade materials have helped lift prices. We see these movements as evidence of a responsive market and increasing investor confidence.
Source: Trading Economics (2025) [2]
FY26 Rewards Strategic, Flexible Producers
We expect inventories and latent production capacity to keep the market balanced in FY26. Companies that focus on margin optimisation and maintain operational flexibility will benefit most.
Pilbara Minerals, for example, is keeping its Ngungaju plant on care and maintenance for FY26. We see this as a smart move to control production and maximise returns when prices improve.
Australia’s Strengths in Production, Exports, and Operational Leverage
Rising Production and Export Earnings: Australia remains the world leader in hard-rock lithium. We expect export earnings to grow from $4.6–$5.2 billion in FY25 to $6.1–$6.6 billion by FY27, more than 40% growth over two years, driven by production growth of over 7% per year. In 2024, our nation accounted for 36% of global extraction, demonstrating the scale and reliability of our production. Australia continues to focus on diversifying processing pathways and expanding exports beyond China, allowing us to capture more value domestically and strengthen the country’s position in the global supply chain.
Strategic Assets and Expansion Plans Are Well Timed: World-class operations such as Greenbushes, where IGO has a joint venture, supply more than 20% of the world’s high-grade lithium concentrate. Expansion projects like Chemical Grade Plant 3 will help meet growing global demand and reinforce Australia’s strategic importance.
Source: Pilbara Minerals (2025)
Pilbara Minerals’ Pilgangoora operation demonstrates how operational efficiency drives competitive advantage. We saw record output in Q1 FY26 alongside a 10.9% reduction in unit operating costs to A$540 per tonne FOB. The P2000 expansion has been deliberately delayed until FY27, which we see as a smart move to avoid oversupply and maximise long-term shareholder returns.
Operational Leverage Drives Profits
Australian hard-rock mining costs remain about 30% higher than brine-based operations in Argentina. Operational leverage allows producers to convert even modest price gains into strong profit growth. For example, PLS saw a 20% increase in realised prices in Q1 FY26 coincide with a 13% drop in unit costs. We see this as a clear demonstration of how scale and efficiency translate into profitability.
We are confident that Australia’s lithium sector has both strength and growth potential. While short-term price swings will continue, producers with low costs, flexible operations, and strong assets are well placed to capture margins as market conditions improve. With global electrification accelerating and Western policies encouraging non-Chinese downstream processing, we see positive prospects for FY26 and beyond.
Five ASX Lithium Stocks Set to Ride the Wave of Market Momentum and Structural Growth
As we see it, not all lithium plays are created equal. These five ASX stocks stand out because they pair recent price momentum with solid underlying fundamentals, think scale, low costs, and secure off-take or financing, that make them resilient in a tightening market. By keeping an eye on these names, investors can position themselves to benefit from the expected FY26 supply squeeze while also tapping into the longer-term structural growth story of lithium.
Pilbara Minerals Limited (ASX: PLS)
Source: PLS, weekly chart (2025)
We see Pilbara Minerals as a real heavyweight in the lithium sector. Its Pilgangoora Operation is the world’s largest independent hard-rock lithium mine, giving it major scale advantages and a leadership position in the global spodumene market. Its joint venture with POSCO in South Korea to produce battery-grade lithium hydroxide adds vertical integration. This helps hedge against spot market volatility and positions the company to capture higher margins on refined lithium products.
Recent performance highlights its resilience. In Q1 FY26, average realized sales prices rose while unit operating costs fell to A$540 per tonne. That combination of efficiency gains and scaled production shows the operational leverage that makes the company highly profitable even in a moderately recovered price environment. The Ngungaju plant remains on care and maintenance, leaving the option to scale quickly when lithium prices support it. Looking ahead, the P2000 feasibility study expected in FY27 could push production beyond 2.0 Mtpa, securing Pilbara Minerals’ position in a market facing post-2026 supply constraints.
Liontown Resources Limited (ASX: LTR)
Source: LTR, weekly chart (2025)
We see Liontown as a company in transition, from developer to major producer. Kathleen Valley is a tier-1 lithium asset, and its long-term off-take agreements with Tesla, Ford, and LG Energy Solution provide reliable revenue streams during ramp-up and reduce exposure to short-term price fluctuations.
The company has also managed the capital environment smartly, receiving government support including a $15 million interest-free loan and waived port and mining fees, along with amendments to off-take agreements that preserve financial flexibility. FY26 will be focused on commissioning and ramping up Kathleen Valley, a key milestone in de-risking the project. With ethical, traceable lithium supply secured, Liontown is well-positioned to meet growing demand from the EV sector.
IGO Limited (ASX: IGO)
Source: IGO, weekly chart (2025)
We like IGO for its diversification. Its stake in the Greenbushes Lithium Mine, the world’s highest-grade lithium operation, is expected to supply over 20% of global lithium by 2026. This gives the company access to high-volume, low-cost production and a strong competitive advantage.
Exposure to nickel and other battery metals also provides a cushion against periods of lithium price volatility. Some Greenbushes off-take agreements are set to expire in FY25, which could affect future pricing if not renewed. Medium-term, the expansion at Greenbushes, including ramping up spodumene production and commissioning Chemical Grade Plant 3, is expected to increase attributable lithium volumes. Overall, IGO is a high-quality, stable play to benefit from market tightening in FY26 and FY27.
Mineral Resources Limited (ASX: MIN)
Source: MIN, weekly chart (2025)
We like MIN for its integrated and diversified business model, which combines mining services, iron ore, and lithium assets at Wodgina and Mt Marion. This diversification provides stable cash flows and cushions the company against the volatility typical of the lithium market.
Recent resource expansions, 107% at Mt Marion and 12% at Wodgina, support long-term production growth, while competitive FOB costs and integrated logistics enhance operational efficiency. As lithium prices recover, MIN is well-positioned to leverage its major producing assets, with non-lithium cash flows providing a financial buffer, making it a strong option for exposure to a recovering lithium market.
Global Lithium Resources (ASX: GL1)
Source: GL1, weekly chart (2025)
We see GL1 as a high-growth, high-beta play. It focuses on exploration and development projects such as Marble Bar in the Pilbara, and its valuation is closely tied to the potential scarcity of new lithium projects rather than current cash flow.
Strategic location in the Pilbara reduces logistical hurdles for future development. Key milestones in FY26 include feasibility studies, resource upgrades, early-stage financing, and securing off-take agreements. If a structural supply deficit emerges in 2026/27, GL1 could benefit significantly, offering a targeted play for investors focused on long-term growth.
Summary
Australia’s lithium sector is entering a powerful growth phase, supported by accelerating electrification, tightening supply, and rising export earnings.
With world-class assets, disciplined production, and expanding global demand, Australian producers are ideally positioned to benefit.
We expect FY26 to mark a turning point as market conditions improve, rewarding efficient, well-capitalised companies such as Pilbara Minerals, IGO, and Mineral Resources, while emerging players like Liontown and Global Lithium offer leveraged growth exposure.
In our view, Australia remains firmly at the centre of the global lithium opportunity.
