Sigma Lithium confronts a dual crisis of alleged operational suspensions and investor lawsuits while Elevra Lithium revises production guidance downward due to recovery issues. Meanwhile, the EU secures critical mineral access via a landmark Mercosur trade deal, aiming to diversify away from Chinese processing dominance. These developments signal a tightening physical market, compounded by advancing solid-state battery material commercialization, which may intensify competition for high-purity lithium units. Near-term price support appears strong, but volatility will persist.
The lithium sector opened 2026 with significant operational turbulence. Sigma Lithium is entangled in a serious controversy following reports that Brazil’s Ministry of Labor and Employment suspended activities at three waste piles at its Grota do Cirilo project, citing “grave and imminent” risk. The company has vehemently denied these reports as “fake news” and part of a “defamation campaign,” but the situation triggered a ~30% stock plunge and prompted an investor fraud investigation by Pomerantz LLP. Crucially, Sigma confirmed it sold an additional 100,000 mt of high-purity lithium fines at a premium price ($195/mt for 1.35% Li₂O), indicating strong demand but also highlighting the sensitivity of project timelines and ESG compliance to market sentiment.
Simultaneously, Elevra Lithium (formerly Sayona/Piedmont) reported a challenging December quarter at its North American Lithium (NAL) operation in Québec. Despite record revenue, spodumene production fell 15% QoQ to 44,154 dmt, with average grade dropping to 4.9% Li₂O due to lower head grades and higher iron content from mining near historical workings. Consequently, Elevra revised its FY26 production guidance down by ~10% to 180,000–190,000 dmt. This underscores a persistent industry issue: the difficulty of maintaining consistent grade and recovery during mine ramp-up and expansion, even in favorable market conditions.
Beyond individual projects, a macro-geopolitical shift is underway. On January 17, the European Union signed a trade agreement with Mercosur, explicitly granting the 27-member bloc “easier access to strategic resources from South America, such as lithium.” EU Trade Commissioner Maroš Šefčovič stated that Brazil “needs investment, procurement agreements, and long-term contracts—this is exactly what we expect and need.” This pact, creating one of the world’s largest free trade zones, is a direct strategic move to diversify critical mineral supply chains away from Chinese dominance in processing and to support the EU’s energy transition.
This agreement could accelerate investment in Brazilian lithium projects (like Sigma’s) but also redirect future production flows toward Europe, potentially reshaping global trade patterns for lithium chemical feedstock.
On the demand side, advancements in next-generation batteries continue. Solid-state battery development is moving from lab to pilot/commercial scale. Furthermore, research from Columbia Engineering published in Joule highlights a new solvent extraction technique (S3E) capable of extracting lithium from low-grade brines with high selectivity, a potential game-changer for unlocking new resources.
The confluence of 1) operational downgrades and project-specific risks (Sigma, Elevra), 2) robust demand evidenced by premium spot sales, and 3) accelerating geopolitical competition for secure supply (EU-Mercosur deal) creates a fundamentally tight physical market outlook for 2026. Prices for spodumene and lithium chemicals are likely to find strong support. However, extreme volatility will persist, driven by sentiment around ESG/compliance headlines and the pace of solid-state battery commercialization. The risk is skewed to the upside, but investors and consumers should prepare for a bumpy ride.