Lithium's Next Bull Run: Positioning for the Rebound After the Market Shakeout

Source: John Newell 02/19/2025

John Newell of John Newell & Associates goes over his thoughts on the lithium market and shares some stocks he believes are worth keeping an eye on.

Lithium: The lightest metal on Earth has become one of the most important. Once dismissed as too reactive and too niche, lithium is now the backbone of electric vehicles, battery storage, and modern technology.

Every smartphone, laptop, and EV runs on lithium-ion batteries, and the demand for lithium continues to grow. But after an explosive bull run from 2020 to 2021, lithium prices collapsed as supply surged and investor sentiment shifted.

Now, with demand accelerating and the supply chain tightening, is lithium ready for its next bull run?

What is Lithium and Where Does It Come From?

Lithium, has become one of the most critical resources for the energy transition, powering electric vehicles, battery storage, and modern technology. Despite its growing demand, 80% of the world’s lithium supply comes from just three countries, they are Australia, Chile, and China. However, Bolivia’s Salar de Uyuni holds the world’s largest known lithium reserves, with estimates of up to 21 million tonnes, potentially accounting for 50-70% of global supply.

Lithium production has surged nearly fivefold in the last decade, from 28,100 tonnes in 2010 to 130,000 tonnes in 2022, reflecting the rapid expansion of the battery market. Extracting lithium, however, is resource-intensive, it takes over 500,000 liters of water to produce just one tonne of lithium, raising concerns about sustainability.

There are three primary methods of lithium extraction: brine extraction, which involves pumping lithium-rich saltwater from underground reservoirs, primarily in South America; hard rock mining, where spodumene ore is crushed and refined, mainly in Australia; and Direct Lithium Extraction (DLE), an emerging technology that promises to improve efficiency and reduce environmental impact. However, lithium extraction comes with several challenges.

Brine mining threatens fragile desert ecosystems, while China’s dominance in refining results in high carbon emissions. Water scarcity remains a critical issue, as evaporation-based extraction depletes already limited water sources. Meanwhile, lithium is at the center of a geopolitical struggle, with governments racing to secure domestic supply chains, making it one of the most strategically important commodities of the decade.

What Happened to Lithium Prices?

The lithium market experienced an unprecedented boom from 2020 to 2021, driven by a combination of surging EV demand, supply constraints, and investor speculation. As the world transitioned toward clean energy, automakers and battery manufacturers scrambled to secure lithium supplies, leading to a massive price surge. At the same time, supply shortages and limited new production capacity created an imbalance that further fueled the rally. Investors rushed into lithium stocks, pushing valuations to unsustainable highs.

Then came the crash. By late 2021, lithium prices began to decline sharply as new supply came online, particularly from Australia and South America. Macroeconomic uncertainty and rising interest rates slowed the momentum of EV growth, and as investor sentiment turned bearish, a wave of selling followed, triggering a steep correction.

Where Could Lithium Prices Go Next?

After peaking in 2021, the LIT ETF retraced over 61.8% of its major move higher from 2020, a common Fibonacci level that often signals the end of a correction. The chart now suggests a strong base is forming, which historically precedes a new accumulation phase. Key technical indicators are turning bullish, suggesting that lithium may be setting up for a recovery.

Technical Signals Indicating a Bottom:

• Higher Lows Forming: Buyers are stepping in at gradually higher levels, indicating accumulation.
• Downtrend Break Potential: A breakout from the multi-year downtrend could confirm a new bullish cycle.
• RSI Recovery: Momentum indicators are shifting positive, suggesting a change in trend.

If history repeats, lithium could be at the start of its next major move higher. With supply tightening, EV demand remaining strong, and Western governments securing domestic production, the lithium market is showing signs of a long-term recovery.

Fundamental Catalysts for Lithium’s Recovery

The demand for lithium continues to rise as the electric vehicle (EV) market remains strong despite a brief slowdown in 2023. Global EV sales exceeded 14 million units, up from 10 million in 2022, with automakers securing long-term lithium supply deals in anticipation of sustained demand growth. In the U.S., the Inflation Reduction Act (IRA) is playing a crucial role in boosting North American lithium production by offering tax incentives and subsidies, further strengthening the region’s push for domestic supply.

However, China still holds a dominant position in the global lithium supply chain, refining 59% of the world’s lithium and aggressively securing resources worldwide through financing and acquisitions. This has forced Western nations to respond, with the U.S., Canada, and Europe accelerating efforts to build independent supply chains. Key initiatives aimed at countering China’s control include the Minerals Security Partnership (MSP), which focuses on diversifying lithium sources, the G7 Global Infrastructure Initiative (PGII), which funds critical mineral projects, and IRA subsidies that support domestic lithium mining and processing.

Beyond EVs, new battery technologies are rapidly advancing, with innovations in solid-state, lithium-iron-phosphate (LFP), and lithium-sulfur batteries improving efficiency and longevity. Additionally, grid-scale energy storage solutions are emerging as a major driver of lithium demand, as renewable energy projects increasingly require large-scale batteries to stabilize power supply. With multiple forces aligning to support lithium’s long-term demand, the sector is well-positioned for a strong recovery.

Companies to Watch: Lithium Explorers and Developers

With lithium prices stabilizing and consolidation occurring in the sector, exploration and development companies are positioned for potential upside. Two junior companies, Xplore Resources and Lion Rock Resources, both stand out due to their strategic land positions and proximity to major lithium discoveries, and the very low market capitalizations in both companies for such strategic locations.

Xplore Resources: Root Bay Lithium Trend: A High-Potential Lithium Play

Xplore Resources Corp. (XPLR:TSX; XPRCF:OTC) is strategically positioned in northwestern Ontario’s Root Bay Lithium Trend, one of the most promising lithium exploration districts in Canada. The company’s Surge Lithium Project spans over 10 kilometers of highly prospective strike length adjacent to Green Technology Metals’ Root Bay Deposit, which holds 10.1 million tonnes at 1.29% Li₂O. Recent drilling results from Root Bay East, just 25 meters from Xplore’s property boundary, returned 23.3 meters at 1.16% Li₂O and 11.7 meters at 1.12% Li₂O, reinforcing the region’s lithium potential. With a drill-ready project and strong surrounding lithium discoveries, Xplore is positioned for significant exploration upside as it prepares for its 2025 drill program targeting high-priority pegmatites.

Beyond its strong asset position, Ontario’s aggressive push into battery metals development further strengthens Xplore’s investment case. The province is quickly becoming a North American lithium hub, benefiting from substantial government and private-sector investments in battery production, EV supply chains, and critical minerals infrastructure. With Ontario being home to six major automakers and a growing battery manufacturing ecosystem, the demand for locally sourced lithium is expected to rise significantly.

Government initiatives highlight Ontario’s commitment to securing a domestic lithium supply chain. Over CA$25 billion has been committed by Volkswagen, Stellantis, General Motors, and Ford to build battery plants and lithium supply chains within the province. Volkswagen’s CA$7 billion gigafactory in St. Thomas is set to be one of North America’s largest EV battery plants, while Stellantis and LG Energy Solutions are investing CA$5 billion in a battery cell plant in Windsor. Additionally, the CA$1.5 billion Strategic Innovation Fund (SIF) has been allocated by the Canadian government to accelerate lithium mine construction and extraction projects, with a focus on supporting junior exploration companies like Xplore Resources.

Further bolstering infrastructure, the Ontario Infrastructure Bank has invested CA$3 billion into transportation, road networks, and power grids in critical mineral-rich regions, ensuring projects like Xplore’s Surge Lithium Project have reliable access to key logistics and energy resources. Meanwhile, under the Inflation Reduction Act (IRA) in the U.S., automakers must source a portion of their lithium and battery materials from North America to qualify for federal tax incentives. This has significantly increased demand for Canadian lithium projects, as the U.S. seeks to reduce its reliance on Chinese supply chains.

With a highly prospective land package, proximity to a major lithium deposit, and strong tailwinds from government initiatives, Xplore Resources is in prime position to benefit from the growing demand for lithium. Its upcoming 2025 drill program will test multiple lithium-bearing pegmatites, aiming to establish a new resource in one of Canada’s most promising lithium districts.

Lion Rock Resources (TSX.V: ROAR): A High-Grade Lithium & Gold Play

Lion Rock Resources is positioned for significant upside as a dual-exposure lithium and gold explorer in South Dakota’s Black Hills, a region known for high-grade lithium-tantalum-tin mineralization and historic gold production. The Volney Project spans 142 hectares of private land, providing a faster permitting process than many North American peers.

High-grade lithium potential is evident in historic assays up to 5.4% Li₂O, with bulk samples averaging 2.5% Li₂O. Despite this, previous drilling only reached shallow depths of 50 meters, leaving substantial room for expansion. Additionally, gold exploration at Rough & Ready Mine and Rusty Shaft has yielded high-grade results, including 18.2 g/t Au over 18.3m.

With an accelerated 2025 drill program targeting both lithium-rich pegmatites and high-grade gold structures, Lion Rock is well-positioned for discovery. The proximity to Coeur Mining Inc. (CDE:NYSE) and Dakota Gold Corp. (DC:NYSE American), coupled with strong U.S. demand for domestic lithium supply, adds to its strategic advantage. For information, you can read this article.

With lithium prices stabilizing and M&A heating up, Lion Rock stands out as a top junior explorer.

Two other names, Atlas Lithium Corp. and American Salars Lithium Inc. could also be positioned for a Potential Turnaround.

Among the hardest hit in the correction were Atlas Lithium Corp. (ATLX:NASDAQ) and American Salars Lithium Inc. (USLI:CSE; USLIF:OTC; Z3P:FWB; A3E2NY:WKN), both of which saw significant share price declines as lithium prices softened and investor sentiment turned bearish. However, technical indicators suggest these stocks may be in the process of also forming a bottom, setting up for a potential recovery.

Atlas Lithium, a key player in Brazil’s hard-rock lithium sector, has aggressively expanded its asset base, positioning itself as a strategic supplier for the growing EV and battery markets.

Meanwhile, American Salars Lithium Inc. is focused on lithium brine exploration in Argentina’s prolific lithium triangle, where some of the world’s largest lithium reserves are located.

Both companies have recently shown signs of stabilizing share prices, with their charts indicating higher lows, suggesting early accumulation by investors. If lithium prices rebound and sector momentum returns, these stocks could be poised for a strong recovery.

Final Thoughts: Lithium is Building a Base for the Next Bull Run

While sentiment in the lithium sector has been weak following the post-2021 crash, both technical and fundamental factors indicate a potential turnaround. Long-term supply challenges, ongoing EV demand, and emerging battery technologies suggest that lithium is far from dead. Instead, the recent correction has created a reset opportunity for investors looking to position ahead of the next move higher.

With global lithium demand projected to rise 500% by 2030, the sector is far from dead. Instead, the recent correction has created a reset opportunity for investors.

The key observations when blend the technical and fundamentals together that as lithium stabilizes and demand surges, investors should watch for breakouts in the Lithium ETF (LIT), China’s strategic acquisitions, and Western governments ramping up efforts to secure domestic supply chains. Increased M&A activity in the lithium exploration sector signals confidence in long-term fundamentals, making this an opportune time for smart investors to position ahead of the next bull run.

If history repeats (never a guarantee), lithium stocks may follow a similar trajectory to previous commodity cycles, where prolonged bear markets lead to explosive rebounds once sentiment and fundamentals align. Keep an eye on breakouts in the Lithium ETF (LIT) and strategic moves by key industry players, this could signal the start of lithium’s next major uptrend.

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Important Disclosures:

1. Atlas Lithium Corp. and Dakota Gold Corp. are billboard sponsors of Streetwise Reports and pay SWR a monthly sponsorship fee between US$4,000 and US$5,000. In addition, American Salars Lithium Corp. has a consulting relationship with Street Smart an affiliate of Streetwise Reports. Street Smart Clients pay a monthly consulting fee between US$8,000 and US$20,000.
2. As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of Dakota Gold Corp., Xplore Resources Inc., Atlas Lithium Corp., and American Salars Lithium Corp.
3. John Newell: I, or members of my immediate household or family, own securities of: Lion Rock Resources and Xplore Resources Inc. I am a direct at Xplore Resources Inc. I determined which companies would be included in this article based on my research and understanding of the sector.
4. Statements and opinions expressed are the opinions of the author and not of Streetwise Reports, Street Smart, or their officers. The author is wholly responsible for the accuracy of the statements. Streetwise Reports was not paid by the author to publish or syndicate this article. Streetwise Reports requires contributing authors to disclose any shareholdings in, or economic relationships with, companies that they write about. Any disclosures from the author can be found below. Streetwise Reports relies upon the authors to accurately provide this information and Streetwise Reports has no means of verifying its accuracy.
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John Newell Disclaimer

As always it is important to note that investing in precious metals like silver carries risks, and market conditions can change violently with shock and awe tactics, that we have seen over the past 20 years. Before making any investment decisions, it’s advisable consult with a financial advisor if needed. Also the practice of conducting thorough research and to consider your investment goals and risk tolerance.

Source: https://www.streetwisereports.com/article/2025/02/19/lithiums-next-bull-run-positioning-for-the-rebound-after-the-market-shakeout.html