After a tumultuous 2024 that noticed lithium carbonate costs tumble 22 percent amid a world provide glut, analysts predict one other 12 months of volatility.
In accordance with S&P Global, lithium surplus is projected to slim to 33,000 metric tons in 2025, down from 84,000 metric tons in 2024, as manufacturing cuts start to mood extra output.
Demand from the electrical car (EV) market stays a key driver, with China sustaining its dominance after record-breaking gross sales in late 2024, whereas North American markets face uncertainty resulting from potential coverage rollbacks underneath the Trump administration.
In the meantime, geopolitical tensions proceed to loom, with rising tariffs on Chinese language EVs and escalating commerce disputes reshaping international provide chains.
As 2025 unfolds, the lithium sector should navigate a number of complexities.
“The secret in lithium [in 2025] is oversupply. Extra manufacturing in locations like Africa and China coupled with softer EV gross sales has completely hammered the lithium value each in 2023 and 2024. I would not assume we are able to dig ourselves out of this gap in 2025 regardless of reliably robust EV gross sales,” mentioned Chris Berry, president of Home Mountain Companions.
Though robust electrical car gross sales could supply some help, Berry cautioned that the subsequent 12 months could possibly be unpredictable by way of value exercise.
“Lithium value volatility is a characteristic of the power transition and never a bug,” he mentioned. “You could have a small however fast-growing market, opaque pricing, laws designed to quickly construct important infrastructure underpinned by lithium and different metals and it is a recipe for boom-and-bust cycles demonstrated by extraordinarily excessive and very low pricing.”
For Gerardo Del Actual of Digest Publishing, seeing costs contract by 80 % over the past two years evidences a bottoming of the lithium market and in addition serves as a powerful sign.
“I believe the truth that we’re up some 7 % to shut the 12 months in 2024 within the spot value leads me to imagine that we will see a reasonably sturdy rebound in 2025 and I believe that is going to increase to the producers which have clearly been affected by the decrease costs, but in addition to the standard exploration corporations,” Del Actual mentioned throughout an interview with the Investing Information Community (INN) in early December.
He went on to notice for contrarian traders with a mid-to-long-term outlook, the present market presents a chief alternative to re-enter the house.
Provide and demand dynamics
After a number of years of oversupply 2025 is anticipated to see widespread manufacturing cuts aiding available in the market’s means to soak up extra provide.
Manufacturing cuts have already began inside and outdoors of China, as William Adams, head of base metals analysis at Fastmarkets advised the INN through e-mail.
“We anticipate additional cutbacks if costs don’t get better quickly within the New Yr. Whereas we’ve seen some cuts, we’re additionally seeing some producers proceed with their growth plans and a few superior junior miners ramp up manufacturing. So, we are actually in a scenario the place we’re ready for demand to meet up with manufacturing once more.”
Adams and Fastmarkets anticipate to see demand catch as much as manufacturing in late 2025. Nonetheless, he did warn that refreshed demand is unlikely to push costs to earlier highs set in 2022.
“We don’t anticipate to see a return to the highs we noticed in 2022, as there are extra producers and mines round now and there was a build-up of shares alongside the provision chain particularly in China,” he mentioned. “This could stop any precise scarcity being seen in 2025, however shares will be held in tight fingers and if the market senses a tighter market, then they could be inspired to restock which might elevate costs. However the restart of idle capability in such a case is more likely to maintain costs rises in examine.”
Analysts at Benchmark are taking the same stance, with a barely extra optimistic tone.
“In 2025, costs are more likely to stay pretty rangebound. It is because Benchmark forecasts a comparatively balanced market subsequent 12 months by way of provide and demand,” mentioned Adam Megginson, senior analyst at Benchmark Mineral Intelligence.
Megginson additionally referenced the output reductions in Australia and China, noting that they might not be as impactful as some market watchers have anticipated.
In July 2024 Australia’s Albemarle (NYSE:ALB), one of many world’s largest lithium producers, introduced plans to halve processing capability in Australia and pause expansionat its Kemerton plant amid the extended lithium value droop.
One of many plant’s two processing trains will likely be positioned in “care and upkeep,” whereas development of a 3rd practice has been scrapped.
“These provide contractions are more likely to be balanced by capability expansions resulting from come on-line in China in 2025, in addition to in African international locations like Zimbabwe and Mali,” he mentioned. “Anticipate provide from these different areas to play a much bigger function available in the market in 2025.”
The unpredictability of geopolitics
Geopolitics is more likely to play a key function on this 12 months’s lithium market instantly and not directly.
In 2024, the Biden administration raised tariffs on Chinese language EVs to over 100 percent to counter alleged unfair commerce practices, aiming to spice up home manufacturing however drawing criticism over potential provide chain disruptions.
Canada adopted with the same One hundred pc tariff and a 25 % surcharge on Chinese language metal and aluminum, citing the necessity to defend native industries.
China responded with WTO complaints towards Canada, the US, and the EU, labeling the measures protectionist.
Whether or not these tariffs are sufficient to bolster the home North American EV market stays to be seen, nonetheless, the difficulty might turn out to be extra difficult if President-elect Trump makes good on his threats to levy tariffs on continental commerce companions, Canada and Mexico.
Nicely, it’s unclear if the brand new president will look to implement tariffs on important minerals like lithium, Del Actual believes it’s unlikely, particularly given the necessity for the supplies and China’s dominance within the manufacturing of so lots of them.
“The underside line is getting right into a tit for tat with China is a harmful proposition due to the leverage they’ve, particularly within the commodity house, and so the tariffs are going to be handed right down to customers. And I do not know that there’s an urge for food within the US for tariffs on a sustained foundation,” he mentioned, proposing that the specter of tariffs is a negotiating tactic.
Extra broadly, useful resource nationalism, near-shoring and provide chain safety will play a prevalent function within the lithium market and the important minerals house as a complete.
“There is not any doubt that lithium particularly has turn out to be politicized as coverage makers throughout the globe have awoken from their slumber and realized that dependence on important supplies and provide chains in a single nation is a nasty thought for each financial and nationwide safety,” mentioned Berry, noting that China made this realization and has spent 20 years getting ready for it.
He added: “There isn’t any straightforward repair and also you’re taking a look at roughly a decade earlier than any western international locations have any form of a regionalized or “buddy shored” provide chain. Accelerating this could contain large capital funding, endurance, and most significantly, political will. North America, particularly, has made nice strides in recent times, however we’ve an extended method to go. I am unsure if full decoupling from China is even a good suggestion.”
For Benchmark’s Megginson, 2025 could possibly be a 12 months of elevated home growth.
“We have now seen a number of international locations trying to undertake some type of ‘useful resource nationalism’. In instances, this has been pushed by desirous to onshore the manufacturing of important minerals which are obligatory for defence and nuclear functions. In others, it stems from a want to be extra self-sufficient to allow them to be extra resilient to produce shocks.”
Proposed Trump tariffs might additionally function a catalyst for US output.
“With the incoming Trump administration, everybody has their eyes on how guarantees of elevated tariffs will likely be applied. Finally, heavier tariffs would speed up efforts to onshore capability within the US,” Megginson defined. “We might even see the EU following go well with with tariffs. There was a lot mentioned of the diversification of the lithium market away from China, however lots of these efforts stalled in 2024 because the downswing in costs and a shifting geopolitical panorama made these endeavours tougher.”
This nationalistic focus can also be projected to affect refinement capability and jurisdiction.
“Whereas extracting the lithium from the bottom has been efficiently executed in non-incumbent international locations, similar to in Brazil, central Africa and Canada, with others anticipated to observe, the constructing of refining capability has proved harder from a know-how and price perspective, with quite a lot of corporations asserting that they’re reining in some growth plans, cancelling some constructing tasks or delaying choices,” Adams from Fastmarkets mentioned.
He went on to notice that South Korea is an space to look at.
“Outdoors of China, South Korea has efficiently ramped up new refining capability, whereas Australia has had combined outcomes. The overall subject is it’s laborious to get the method proper and the Capex and Opex outdoors of China means it’s laborious to be aggressive. Will probably be fascinating to see how Tesla’s new Texas plant ramps up,” he mentioned.
Elsewhere, Adams pointed to the will to safe provide chains.
“Useful resource nationalism has additionally been a problem in some jurisdictions, with extra international locations now wanting processing capability to be constructed within the nation and with the intention to drive that they’ve banned the export of lithium bearing ores. Zimbabwe a living proof,” he mentioned.
He additionally pointed to Chile’s efforts to partially nationalise lithium producers, with the federal government mining firm having controlling stakes in producers.
“This might deter worldwide funding in growing these mines,” he mentioned. “In different metals, Indonesia has been very profitable in taking part in the useful resource nationalism card.”
EV and storage sector development key drivers
Undoubtedly the aforementioned components will function headwinds or tailwinds to the 2025 lithium market. Nonetheless, probably the most pronounced pattern that may drive the lithium market is the EV sector, and to a barely lesser extent the power storage system (ESS) house.
“Demand for lithium-ion batteries is about to proceed to develop quickly in 2025. Benchmark forecasts that EV and ESS-related demand for lithium will each enhance by over 30 % year-on-year in 2025,” mentioned Megginson.
To satiate this uptick in demand “further volumes of lithium might want to come to market.”
He additionally famous that sturdy ESS demand is a optimistic sign for demand for LFP cathode chemistries however is unlikely to outweigh the mounting EV demand in China which can proceed to account for an growing home share of LFP cathode chemistries, mentioned Megginson.
This sentiment was additionally echoed by Berry, who expects the EV and ESS sectors to proceed dominating market share by way of lithium finish use.
“EVs and ESS are roughly 80 % of lithium demand, and this exhibits no indicators of abating. Different lithium demand avenues will develop reliably at international GDP, however the way forward for lithium is tied to growing proliferation of the lithium-ion battery,” mentioned Berry.
Regardless of weak EV gross sales in Europe and North America in 2024, Fastmarkets’ Adams expects to see a restoration in demand from these areas paired with robust gross sales in China.
The dip in European gross sales, notably in Germany after subsidy cuts in early 2024, mirrors China’s 2019 slowdown following subsidy reductions. Nonetheless, like in China, the decline seems short-term, with restoration anticipated as stricter emissions penalties take impact in Europe in 2025, he defined.
Moreover, he pointed to the rising adoption of Prolonged Vary EVs (EREVs), which tackle vary anxiousness and use bigger batteries than PHEVs, as a catalyst for lithium demand, nonetheless, he famous the outlook for EVs within the US stays unsure forward of Donald Trump’s presidency.
“ESS demand has been notably robust, particularly in China and we anticipate that to proceed as the necessity to construct renewable power technology capability is ever current and has a large footprint, for instance ESS construct out in India is powerful, whereas demand for EVs is much less robust, however once more it’s robust for two/3 wheelers,’ mentioned Adams.
He continued: “Additionally the low lithium and different BRM (battery uncooked supplies) costs has lowered lithium-ion battery costs which has been good for ESS tasks.”
Finally, the 2025 lithium market is anticipated to show volatility however might additionally current an opportune entry level for traders.
“I can see a One hundred pc- 150 % rebound within the lithium spot value simply in 2025, and once more, I believe there’s a variety of alternative there,” mentioned Del Actual.
For Megginson, the 2025 market will likely be formed by geopolitics and relations.
“Coverage could have an enormous function to play in driving value traits in 2025. As an illustration, there stays uncertainty round how the tariffs promised by an incoming Trump administration within the US can be applied, and the way they might reshape the worldwide lithium panorama,” he mentioned.
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Securities Disclosure: I, Georgia Williams, maintain no direct funding curiosity in any firm talked about on this article.
Editorial Disclosure: Beyond Lithium and Grid Battery Metals are shoppers of the Investing Information Community. This text will not be paid-for content material.
The Investing Information Community doesn’t assure the accuracy or thoroughness of the data reported within the interviews it conducts. The opinions expressed in these interviews don’t replicate the opinions of the Investing Information Community and don’t represent funding recommendation. All readers are inspired to carry out their very own due diligence.
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