Lithium’s comeback: what's driving demand, what could derail it, and the ASX lithium stock to watch

After enduring one of the most brutal commodity downturns in recent memory - a withering three-year bear market that saw lithium prices collapse by as much as 90% - the ASX lithium sector has staged a sharp rebound.

As benchmark lithium prices have more than doubled off their lows, sentiment has turned decisively positive, and investors are once again asking whether this is merely another short-lived bounce, or the start of a new cycle.

To help answer that question, I recently sat down with Matt Griffin, Co-Portfolio Manager for Australian Small Companies at Maple-Brown Abbott, whose deep experience across multiple lithium cycles offers a rare blend of historical perspective and forward-looking insight.

Our discussion ranged from the true drivers of lithium demand - both near-term and structural - to the risks that could derail the new bull market, and finally to the ASX lithium stock he believes still offers compelling upside.

Matt’s responses were both illuminating and refreshingly unsentimental - rare in a sector that’s so prone to one-eyed, demand-narrative bullishness. It’s essential reading for investors looking to expand, or refine, their exposure to the lithium story.

What’s driving lithium demand - and is it sustainable?

According to Griffin, lithium demand today rests on two established pillars, one of which is a rapidly emerging force. The first, electric vehicles (EVs), remains the most visible driver, but the centre of gravity has shifted.

“Over the last couple of years, demand growth for lithium has been about 20–25% per annum,” Griffin says. “So not the extreme levels we saw earlier in the decade, but still very consistent and quite strong.”

EV demand, he argues, has proven far more resilient than many critics expected. While the global transition has moderated - with hybrids gaining ground as subsidies roll off - the rise of Chinese manufacturers exporting high-quality, low-cost EVs has reshaped the competitive landscape.

“You’re getting extremely good Chinese products at very low costs. Consider how successful BYD has been in Australia and elsewhere in Asia, and this is driving a response from traditional car companies,” Griffin notes. “That dynamic has a long way to play out.”

The long-flagged threat of sodium-ion batteries replacing lithium has also failed to materialise in any meaningful way. “We’ve really seen very little of that come through despite years of reported breakthroughs,” he says. “To me, sodium-ion is a bit of a sideshow for now — I don’t think it’s a real threat.”

But the true demand shock, Griffin argues, has come from battery energy storage systems (BESS).

“What’s really taken centre stage over the past six to twelve months has been BESS demand,” he says. “In the last five years, BESS demand is up by a factor of about eight times.”

BESS allows renewable energy producers to store electricity generated during low-price periods and release it during peak demand — a structural efficiency gain that now works without subsidies. Last year, BESS accounted for roughly 20% of lithium demand; this year, estimates are closer to 30%. “It’s been the big driver that’s really turned the lithium price around the past 6- to 12-months,” Griffin notes.

And the story doesn’t end there.

“The buildout of AI data centre infrastructure requires a huge amount of power,” Griffin explains. “We’re seeing solar farms with batteries attached being built right next to data centres. That could really kick up demand again into 2026 and 2027.”

What could go wrong — and why supply is the real risk

Despite the improving demand picture, Griffin is unequivocal about where the real risk lies. “I think what ultimately derails the higher lithium price thesis is the supply side,” he says.

Unlike more established bulk commodities such as iron ore, where supply expansions take many years to bring online, lithium’s relatively flexible supply pipeline has historically meant high prices quickly attract new capacity. At current spot prices, Griffin notes, “every project in the world works.”

“If prices stay around these levels for six months, that’s when financiers and mine owners get confident,” he says. “Within six to twelve months you’ll see brownfield projects come online, and within two to three years, production from greenfield projects.”

This has played out repeatedly. Griffin points to the industry’s notorious bullwhip effect, where small changes in end demand cascade into massive swings in upstream pricing due to long and complex supply chains.

“You’ve got six stages from mine to EV,” he explains. “When demand softens even slightly, everyone de-stocks, and by the time you get to the spodumene producer, the market just dries up.”

That dynamic explains why lithium prices can rise ten-fold on the way up and fall 90% on the way down.

Regulatory interventions in China have temporarily tightened supply, particularly via restrictions on high-cost lepidolite production. But Griffin cautions against assuming this will last indefinitely.

“At the end of the day, the Chinese government can do whatever they want,” he says. “But there will come a point where it’s in their national interest not to have lithium prices too high.”

Nor does he believe the industry’s largest players will show restraint. “If the big owners don’t expand, someone else will,” Griffin says. “And that will probably tank the price anyway.”

His conclusion is pragmatic rather than pessimistic. “My view is you don’t fight the momentum,” he says. “Right now, momentum and demand are good. But I’ll be watching very closely when new supply starts coming online.”

ASX lithium stocks to consider — and why one stands out

When it comes to investing, Griffin is selective. In fact, Maple-Brown Abbott currently holds just one ASX lithium stock: Elevra (ASX: ELV).

The company was formed through the merger of Sayona Mining and Piedmont Lithium, a union that Griffin believes fundamentally changed the investment case.

“What attracted us was the new management team and the removal of a very toxic offtake agreement,” he says. “That was a huge handbrake if prices rallied.”

Elevra’s North American Lithium (NAL) mine is now operational, cash-flow positive at current prices, and supported by a significantly strengthened balance sheet. “They’ve got around A$300 million of cash,” Griffin notes. “It makes sense for them to accelerate expansion.”

Beyond NAL, Griffin sees significant optionality in the Moblan Lithium Project — an asset largely ignored during the downturn. “Moblan was valued at zero by the market for a long time,” he says. “I think that will start to change.”

Strategic location is another differentiator. “NAL is one of the only producing lithium mines in North America,” Griffin says. “That gives it strategic importance as the US builds out its own battery supply chain.”

Crucially, that geographic positioning also gives Elevra an advantage that neither emerging African producers nor Western Australian producers such as PLS Group (ASX: PLS) and Liontown Resources (ASX: LTR) can easily replicate.

He also highlights the potential for future offtake agreements, local refining partnerships, and reduced shipping costs relative to Australian and African producers.

Despite a strong recent rally, Griffin believes Elevra remains under-owned. “There’s virtually no broker coverage despite a $1.5 billion market cap,” he says. “That’s another potential leg up.”

The risks are clear - single-asset exposure, higher relative costs, and weather-related operational issues - but Griffin views them as manageable within the broader opportunity set. “Provided lithium prices behave,” he concludes, “I still think there’s a rerate to come.”

Final thoughts — a coherent framework

Few sectors illustrate the boom-and-bust nature of commodities as vividly as lithium. Yet, as Matt Griffin’s insights make clear, today’s cycle is being driven by forces that extend well beyond EV adoption alone - from grid-scale storage to AI-driven energy demand.

Equally, the risks are familiar, measurable, and cyclical — particularly on the supply side.

Taken together, Griffin’s views offer a coherent framework for understanding lithium’s past, assessing its present, and navigating its future. For investors serious about the sector, the full interview transcript is compulsory reading — and a valuable guide for thinking clearly about what comes next.