Lithium’s Collapse is Starting to Feel Like an Opportunity

There’s a strange paradox in lithium markets right now.

Prices are up; demand is up…lithium stocks?

Decimated!

Today, I want to unpack this paradox. It could present an opportunity for you.

More on that shortly.

But first…

Beating the Markets Can’t Be This Easy,
 Can It?

Let’s start the week off with an extraordinary chart that certainly caught my attention over the weekend.

Check it out:

Source: Shiller S&P Composite (dividends reinvested); London spot gold

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As you can see, priced in gold, the S&P 500 (the top 500 stocks in the US) is still down 65.5% from its 2000 dot-com high — even with every dividend reinvested.

Think about that for a second…

A shiny, inert metal has vastly outperformed the world’s premier stock market over the past 26 years!

It’s a fact worth ruminating on if, and when, the current AI bubble starts to pop.

Zooming out further, gold has lost only 0.7% per year to stocks since Nixon closed the gold window in 1971.

Which brings us, in a roundabout way, back to that all-important decade… the 1970’s.

As we noted last week, the economic backdrop we’re in right now is eerily similar to that turbulent time.

The bond market continues to anticipate inflation risk as yields climb; massive government deficits are deepening against the backdrop of persistent wars. Not to mention an energy crisis that just won’t go away.

For better or (probably) worse, the 1970s economic conditions are back!

We’ll discuss what that means for copper, gold, and oil later this week.

But there’s a key difference this time around worth noting, specifically in energy markets…

Oil isn’t the only Game in Town

Oil isn’t quite the dominant force as it once was in energy markets.

Renewables (shown below in green) are the clear growth story of this decade:

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Lithium is a big beneficiary of this.

It’s used in batteries for both electric vehicles and grid-scale storage.

You probably know all about the growth of EV’s, but the grid-scale side of things is also growing fast.

As Rio Tinto CEO, Simon Trott noted last Wednesday:

‘Grid storage battery demand for lithium is growing faster than expected.’

That surge in demand is showing up in prices.

Lithium carbonate is currently priced at around $21,500/t, up 26% year-to-date.

Bear in mind, this is a market projected to grow at a hefty 12-14% per year through the 2030’s.

So, the lithium bull is back on, then?

Not quite…

The Paradox

Lithium stocks have had a horror few months.

As one market analyst wrote recently:

‘Equities have cratered. Most producers are now trading well below their 200DMAs.

Since its high in mid-April, Albemarle is down 48%, PLS is down 39% from its high and even low-cost brine producer Lithium Argentina is down 49%. Lithium developers have fared even worse.’

At first glance, it doesn’t make sense.

So, what’s going on?

Two Fears

First up, the ‘supply fear’…

Chinese regulators have recently approved the reopening of the massive Jianxiawo lepidolite mine (it had stopped mining in 2025 due to environmental concerns).

This mine is owned by the world’s largest EV battery manufacturer, CATL, and will add roughly 3% to global lithium output.

Then there’s a second worry – the ‘demand fear’…

You see, lithium isn’t the only game in town when it comes to battery tech.

An alternative battery chemistry based on sodium (the same stuff as common salt!) is making recent headlines.

As you can see here:

Source: Google News

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Sodium is abundant and has the potential to be cheaper and safer than lithium.

If widely adopted, it could threaten those juicy 12-14% growth projections for lithium demand.

On the flipside, sodium-ion batteries are heavier, have shorter lifespans, and the tech isn’t as proven.

What’s more, lithium-ion has a 15-year head start – that means established manufacturing scale, warranties, recycling, and optimised supply chains.

So, sodium isn’t displacing lithium overnight; it’ll take many years…if it happens at all.

But the perceived threat is a contributing factor to lithium’s current negative sentiment.

So, what comes next?

One Chart I’m Watching Closely

Away from ongoing speculation on future supply and demand, one thing remains clear.

Right now, at least, demand is outstripping supply.

Check this chart out:

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Chinese lithium stockpiles have been falling since the August 2025 peak, and the downward trend is accelerating.

So far, stocks have ignored this. But if it continues, the market will eventually take note.

And with lithium stocks down 40-50% already, there could be an opportunity brewing here.

Watch this space.