Lithium miners are reporting strong first-half profits as demand for battery storage rises, Bloomberg reported, with some producers also preparing to increase output and expand capacity.

Two Chinese lithium producers, Tianqi Lithium Corp. and Ganfeng Lithium Group, said they posted their biggest profits in three years for the first six months of the year, according to the report. In the United States, Albemarle said global lithium demand had increased 45% year over year through May, driven largely by demand for battery storage. Supply has grown more slowly, widening the gap and benefiting lithium miners, while also underscoring how closely the market is tied to the pace of new battery deployments.

“Overseas supply may be affected by policy and logistics, and some production restarts will take time for actual supply to return to the market,” Tianqi Lithium Corp. officials warned, as quoted by Bloomberg. The comments suggested that lithium prices could still have room to rise further.

Earlier this year, CATL, the world’s largest battery maker, said it expected energy storage to account for about half of its global sales by 2030 as the expansion of wind and solar power increases demand for batteries that can store excess electricity for later use.

The war in the Middle East has also added to demand for battery storage and lithium as energy-importing countries accelerate plans for alternative energy in an effort to reduce dependence on Middle Eastern oil and gas.

Battery storage has become increasingly important for power grids with large amounts of wind and solar generation, which depend on weather and do not always produce electricity at the same time that demand is highest. That makes storage a practical part of grid balancing, alongside flexible generation, transmission links, demand response, and other forms of energy storage, especially as utilities and developers add more renewables to their systems. Batteries can store surplus power and release it later when needed.

By Irina Slav for Oilprice.com