VINACHEM

The lithium market in 2025 is expected to face significant challenges due to production cuts, shifting demand patterns and geopolitical tensions. These factors are poised to reshape the market landscape, impacting supply chains and pricing strategies.

After years of significant oversupply, the global lithium market will tighten in 2025, according to Fastmarkets projections.

The impact of production cuts last year and improvements in demand from certain areas of the downstream supply chain will start to take effect this year, leading to a tighter market.

But even with tightening supply, many market participants are reserving judgement on the outlook for 2025, saying the year ahead is far from certain.

With significant latent production capacity ready to meet new demand within “weeks”, new lower-cost projects due onstream this year and uncertainty around US and China trade tensions, the market could be facing another challenging year, even in a tightening supply environment.

The end of the current cycle of oversupply?

The lithium market has been oversupplied for several years, in part due to expectations of huge increases in demand for lithium driven by the energy transition.

According to Fastmarkets’ research team, production of lithium globally jumped from just over 737,000 tonnes in 2022 to almost 1.2 million tonnes in 2024 on a lithium carbonate equivalent (LCE) basis.

This increase in production largely mirrored increases in demand. But slower than expected rates of electric vehicle (EV) adoption weighed on the market and contributed to oversupply.

Fastmarkets’ research team forecasted that the lithium market recorded a surplus of around 175,000 tonnes in 2023, and almost 154,000 tonnes in 2024 based on current available data.

But there is a growing sense among market participants and industry analysts that the market balance could be much tighter this year. Fastmarkets projects an oversupply of just 10,000 tonnes in 2025, and swinging to a 1,500-tonne deficit in 2026.

“Lithium market conditions – particularly during the latter part of 2024 – led to growing producer restraint, both in China and elsewhere,” Fastmarkets head of battery raw material analytics Paul Lusty said.

“Australian production cuts started in January 2024 but built momentum during the year, with several miners announcing production cuts, plans to place plants on care and maintenance and the suspension of planned expansions owing to market conditions. Chinese producers have not been immune to weakening prices in 2024, and the market sighed in relief when in September last year, one of China’s largest lepidolite mines halted production due to its higher production costs.”

Mixed views for 2025 lithium market balance

The move to a more balanced supply and demand picture has been aided by relatively robust annual global growth in EV adoption, forecast at 29% for 2024, and rapid annual growth in the energy storage system (ESS) sector, forecast at 25% for2024, increasing to 37% in 2025.

Some market participants echoed the view that the lithium market could move into a more balanced supply/demand outlook in the short to medium term.

“We’re expecting a rebalancing of market dynamics over the next few years,” one producer told Fastmarkets.

“The past few years [of low prices and over supply] have been unsustainable,” one trader noted.

“We’ve now seen some response from the supply side, though it remains to be seen if there is a demand-side response in 2025,” the trader added.

But this view is not shared by all, with some analysts still taking a bearish view of supply for this year.

Some within the physical market have taken a more cautious view for 2025 amid geopolitical and

The rise and fall of lithium prices

Lithium prices were in steep decline throughout most of 2024 – largely because of an oversupplied market – in stark contrast to their rapid rise to all-time highs in 2021-2023.

By the end of 2024, the combination of slowing EV demand growth, oversupply and battery cost pressures led to lithium salts prices falling rapidly.

Fastmarkets assessment of lithium hydroxide’s spot price CIF China, Japan and South Korea fell to $8-9 per kg on November 12, 2024, the lowest range for battery-grade lithium hydroxide in the region since Fastmarkets launched its prices in 2017.

Since then, hydroxide prices have recovered slightly. Fastmarkets most recently assessed the lithium hydroxide monohydrate LiOH.H2O 56.5% LiOH min, battery grade, spot price cif China, Japan & Korea at $8.00-11.00 per kg on Friday January 31.

Although some recovery has been seen in prices since November last year, market participants highlighted that current prices generally sit well below the incentive price level for the development of new lithium production assets.

Rebalancing in a bear market

Signs of a market reaction to persistent low prices began in January 2024, as US producer Albemarle planned to defer spending on its US lithium refinery project, as well as cut both costs and jobs.

Days later, Australian producer Liontown Resources announced it could defer the expansion and ramp-up up of its Kathleen Valley lithium project as part of a cost-cutting review.

But market participants across the global supply chain noted that further cuts would be required to existing operations in order to rebalance the market, in addition to these postponements to expansions.

Ultimately, these additional production cuts did not truly emerge in the market before September last year, when a major Chinese producer halted output at one of the biggest lepidolite mines in the country, causing three associated lepidolite processing plants to shut down.

Further production cut announcements emerged in the last quarter of 2024, along with more project start-up delays and even curtailments, mainly in the west.

Australian spodumene producers Pilbara Minerals and Mineral Resources (MinRes) both announced that one of their production assets would be mothballed in 2025 amid the low price environment and oversupply.

“For some Western companies, the bear market is simply a case of trying to survive; some will really struggle to get through the slump and run the risk of becoming a casualty like those in 2019-2020,” Lusty said.

At current spot lithium salt and spodumene prices, the industry is reportedly deep into the cost curve, and both hardrock producers and brine and hardrock producers alike have, for the most part, made capital expenditure adjustments for 2025, which has, in turn, cut Fastmarkets’ supply forecast.

Fast supply response possible

While the supply side reaction to the low-price environment has led to cuts in production, some market participants have noted a degree of caution on the support this will provide, due to the speed in which the assets can be ramped up again.

“It’s important to factor in the speed in which most assets can be brought back online,” one consumer told Fastmarkets.

“For the lepidolite operations in China, our understanding is [it takes] weeks not months to resume full production,” they added.

The consumer noted a similar picture for the mothballed Australian spodumene operations, with both Pilbara and MinRes noting that the operations could be returned to fully operational status relatively quickly, as producers are keen to ensure that their assets are able to respond quickly to future shifts in pricing dynamics, particularly after the events of 2021-2022.

Ultimately this means that any sudden shift in pricing could see a shift in the forecasting of the market balance in 2025.“Despite forecasting tighter market conditions in 2025, Fastmarkets does not expect a strong recovery in prices, as the market should be cushioned from any actual shortage because there is considerable inventory in the supply chain, especially in China, and we know that some idled capacity could rapidly come back online,” Lusty said.

Geopolitical tensions could weigh on the lithium market

Since the United States presidential election race concluded in November 2024, commodity market discussions have been dominated by the implications of a potential trade war, particularly between the US and China.

Given China’s leading position in the refining and consumption of lithium, there is some expectation within the market that the lithium industry will not be unscathed by rising geopolitical tensions.

China has already moved aggressively in a number of critical mineral markets to introduce export controls and restrictions.

And the lithium sector experienced its first taste of trade war implications at the start of 2025.

On January 2, China’s Ministry of Commerce announced that it was inviting feedback on proposed restrictions on technology exports, including technologies relating to lithium salt production and the production of battery grade lithium iron phosphate (LFP), lithium manganese iron phosphate (LMFP) and other cathode materials.

This potential technology export ban could have significant ramifications on the global lithium-ion battery supply chain, with China dominating the space and many western companies seeking Chinese expertise to support the development of projects.

Chinese battery makers, including CATL, Gotion, and EVE energy have all announced plans to establish joint ventures with western companies to produce EV batteries outside of China, and any potential export fan could call these agreements into question.

“Given China’s strength in LFP production, a technology ban could have significant implications on western car companies looking to use LFP in their fleets,” a second trader said.

The US is yet to announce any direct measures relating to lithium, beyond existing policy relating to the Inflation Reduction Act.

However, earlier in January, the US Department of Defense placed CATL on its Chinese Military Company (CMC) list, classifying them as a military company with links to the Chinese military.

While inclusion on this list does not stop US entities or other government agencies from doing business with CATL, it does act as a guide for other federal government departments to consider actions against the company, such as sanctions.

It is not currently clear if any such actions will happen under a Trump presidency, though market participants are reportedly keeping a close eye on developments and adopting a ‘wait-and-see’ approach.

“Given the current structure of the market, if lithium does get dragged into a trade war, that could have significant consequences, particularly on other regions such as Europe,” a second consumer said.

“It is likely that we are in for another volatile year in lithium,” a third trader said.  – Source: Fastmarkets –