VINACHEM

The lithium market enters 2025 at a crossroads, shaped by persistent oversupply, geopolitical shifts and evolving demand dynamics in the electric vehicle sector.

After a tumultuous 2024 that saw lithium carbonate prices tumble 22 percent amid a global supply glut, analysts are predicting another year of volatility for the important battery metal.

Even so, some balance is expected to return — according to S&P Global, the lithium surplus is projected to narrow to 33,000 metric tons in 2025, down from 84,000 metric tons in 2024, as production cuts begin to temper excess supply.

Demand from the electric vehicle (EV) market remains a key driver, with China maintaining its dominance after record-breaking sales in late 2024. In North America, the EV sector will face uncertainty under the Trump administration.

As 2025 unfolds, the lithium sector will also have to navigate geopolitical tensions, including rising tariffs on Chinese EVs and escalating trade disputes that are reshaping global supply chains.

“The name of the game in lithium (in 2025) is oversupply. Excess production in places like Africa and China, coupled with softer EV sales, has absolutely hammered the lithium price both in 2023 and 2024. I wouldn't think we can dig ourselves out of this hole in 2025 despite reliably strong EV sales,” said Chris Berry, president of House Mountain Partners.

In his view, the next 12 months could be unpredictable in terms of lithium price activity.

“Lithium price volatility is a feature of the energy transition and not a bug,” he said. “You have a small but fast-growing market, opaque pricing, legislation designed to rapidly build critical infrastructure underpinned by lithium and other metals, and this is a recipe for boom-and-bust cycles demonstrated by extremely high and extremely low pricing.”

For Gerardo Del Real of Digest Publishing, seeing prices for lithium contract by 80 percent over the last two years evidences a bottoming in the lithium market and also serves as a strong signal.

“I think the fact that we're up some 7 percent to close the year in 2024 in the spot price leads me to believe that we're going to see a pretty robust rebound in 2025. I think that's going to extend to the producers that have obviously been affected by the lower prices, but also to the quality exploration companies,” Del Real said in December.

He believes contrarian investors with a mid to long-term outlook have a prime opportunity to re-enter the space.

Lithium market to see more balance in 2025
As mentioned, widespread lithium production cuts are expected to help bring the sector into balance in 2025.

William Adams, head of base metals research at Fastmarkets, told the Investing News Network (INN) via email that output cuts for the battery metal have already started inside and outside of China.

“We expect further cutbacks if prices do not recover soon in the new year. While we have seen some cuts, we are also seeing some producers continue with their expansion plans and some advanced junior miners ramp up production. So we are now in a situation where we are waiting for demand to catch up with production again," he said.

Adams and Fastmarkets expect to see lithium demand catch up to production in late 2025. However, he warned that refreshed demand is unlikely to push prices to previous highs set in 2022.

“We do not expect to see a return to the highs we saw in 2022, as there are more producers and mines around now and there has been a buildup of stocks along the supply chain, especially in China,” he said.

“This should prevent any actual shortage being seen in 2025, but stocks can be held in tight hands, and if the market senses a tighter market, then they may be encouraged to restock, which could lift prices. But the restart of idle capacity in such a case is likely to keep prices rises in check," Adams added.

Analysts at Benchmark Mineral Intelligence are taking a similar stance, with a slightly more optimistic tone.

“In 2025, prices are likely to remain fairly rangebound. This is because Benchmark forecasts a relatively balanced market next year in terms of supply and demand,” said Adam Megginson, senior analyst at the firm. He also referenced output reductions in Australia and China, noting that they may not be as impactful as some market watchers anticipate.

This past July, Albemarle (NYSE:ALB), announced plans to halve processing capacity in Australia and pause an expansion at its Kemerton plant amid the prolonged lithium price slump. One of the plant’s two processing trains will be placed on care and maintenance, while construction of a third train has been scrapped.

“These supply contractions are likely to be balanced by capacity expansions due to come online in China in 2025, as well as in African countries like Zimbabwe and Mali,” Megginson said.

“Expect supply from these other regions to play a bigger role in the market in 2025.”

Unpredictable geopolitical situation to impact sector

Geopolitics is likely to play a key role in the lithium market this year, both directly and indirectly.

In 2024, the Biden administration raised tariffs on Chinese EVs to over 100 percent to counter alleged unfair trade practices, aiming to boost domestic production, but drawing criticism over potential supply chain disruptions.

Canada followed suit with similar 100 percent tariffs on Chinese EVs, as well as a 25 percent surcharge on Chinese steel and aluminum, citing the need to protect local industries. China has responded with World Trade Organization complaints against Canada and the US, along with the EU, labeling the measures protectionist.

Whether these tariffs against China will be enough to bolster the domestic North American EV market remains to be seen; however, the issue could become even more complicated if US President-elect Donald Trump makes good on his threats to levy tariffs on America's continental trade partners, Canada and Mexico.

Del Real doesn't expect US tariffs on critical minerals like lithium, but expressed concerns about a trade war.

“The bottom line is getting into a tit-for-tat with China is a dangerous proposition because of the leverage they have, especially in the commodity space, and so the tariffs are going to be passed down to consumers," he said. In his view, Trump's tariff threats could be more of a negotiating tactic than a sustained strategy.

More broadly, the experts INN heard from expect resource nationalism, near shoring and supply chain security to play prevalent roles in the lithium market and the critical minerals space as a whole.

“There's no doubt that lithium in particular has become politicized as policy makers across the globe have awoken from their slumber and realized that dependence on critical materials and supply chains in a single country is a bad idea for both economic and national security,” said Berry, noting that China had this realization decades ago.

“There is no easy fix, and you're looking at roughly a decade before any western countries have any sort of a regionalized or 'friend-shored' supply chain. Accelerating this would involve massive capital investment, patience and most importantly, political will. North America in particular has made great strides in recent years, but we have a long way to go. I'm not sure if fully decoupling from China is even a good idea," the battery metals expert added.

For Benchmark’s Megginson, 2025 could be a year of increased domestic development.

“We have seen several countries attempting to adopt some form of 'resource nationalism.' In some cases, this has been driven by wanting to onshore the production of critical minerals that are necessary for defense and nuclear applications. In others, it stems from a desire to be more self-sufficient so they can be more resilient to supply shocks.”

Proposed tariffs from Trump could also serve as a catalyst for US lithium output.

“With the incoming Trump administration, everyone has their eyes on how promises of increased tariffs will be implemented. Ultimately, heavier tariffs would accelerate efforts to onshore capacity in the US,” Megginson said.

“We may see the EU following suit with tariffs. There has been much said of the diversification of the lithium market away from China, but many of those efforts stalled in 2024 as the downswing in prices and a shifting geopolitical landscape made these endeavors more challenging," added the Benchmark senior analyst.

This nationalistic focus is also projected to impact refinement capacity and jurisdiction.

“While extracting the lithium from the ground has been successfully done in non-incumbent countries, such as in Brazil, Central Africa and Canada, with others expected to follow, the building of refining capacity has proved more difficult from a know-how and cost point of view, with a number of companies announcing that they are reining in some expansion plans, canceling some building projects or delaying decisions,” Adams of Fastmarkets said.

He went on to note that South Korea is an area to watch.

“Outside of China, South Korea has successfully ramped up new refining capacity, while Australia has had mixed results. The general issue is it’s hard to get the process right, and the CAPEX and OPEX outside of China means it is hard to be competitive. It will be interesting to see how Tesla’s (NASDAQ:TSLA) new Texas plant ramps up,” Adams noted.

Elsewhere, Adams pointed to the desire to secure supply chains. “Resource nationalism has also been an issue in some jurisdictions, with more countries now wanting processing capacity to be built in the country, and in order to force that they have banned the export of lithium-bearing ores. Zimbabwe a case in point,” he told INN.

Adams also pointed to Chile’s efforts to partially nationalize lithium producers, with the government mining company having controlling stakes in producers. “This could deter international investment in developing these mines,” he said. “In other metals, Indonesia has been very successful in playing the resource nationalism card.”

EV and ESS sectors to be key lithium price drivers

While the factors mentioned will undoubtedly impact the lithium industry in 2025, the market's most pronounced driver is the EV sector, and to a lesser extent the energy storage system (ESS) space.

“Demand for lithium-ion batteries is set to continue to grow rapidly in 2025. Benchmark forecasts that EV and ESS-related demand for lithium will both increase by over 30 percent year-on-year in 2025,” said Megginson.

To satiate this uptick in demand, “additional volumes of lithium will need to come to market.”

Megginson also noted that robust ESS demand is a positive demand signal for lithium-iron-phosphate (LFP) cathode chemistries, but is unlikely to outweigh the mounting EV demand in China.

This sentiment was echoed by Berry of House Mountain Partners, who expects the EV and ESS sectors to continue dominating market share in terms of lithium end use. “EVs and ESS are roughly 80 percent of lithium demand, and this shows no signs of abating. Other lithium demand avenues will grow reliably at global GDP, but the future of lithium is tied to increasing proliferation of the lithium-ion battery,” he commented to INN.

Despite weak EV sales in Europe and North America in 2024, Fastmarkets’ Adams expects to see a recovery in demand from these regions, paired with strong sales in China. The dip in European sales, particularly in Germany after subsidy cuts in early 2024, mirrors China’s 2019 slowdown following subsidy reductions. However, as with China, the decline appears temporary, with a recovery expected as stricter emissions penalties take effect in Europe in 2025.

Additionally, Adams pointed to the growing adoption of extended-range EVs, which address range anxiety and use larger batteries than plug-in hybrid EVs, as a catalyst for lithium demand.

However, he noted that the outlook for EVs in the US remains uncertain as Trump takes the helm.

“ESS demand has been particularly strong, especially in China, and we expect that to continue as the need to build renewable energy generation capacity is ever present and has a wide footprint. For example, ESS buildout in India is strong, whereas demand for EVs is less strong, but again it is strong for 2/3 wheelers," said Adams. He added that low prices for battery raw materials have lowered prices for lithium-ion batteries, benefiting ESS projects.

Ultimately the lithium market is expected to see volatility in 2025, but could also present opportunities.

"I can see a 100 to 150 percent rebound in the lithium spot price easily in 2025. And again, I think there's a lot of opportunity there,” Del Real of Digest Publishing emphasized to INN.

For Megginson, the sector will be shaped by geopolitics and relations moving forward.

“Policy will have a huge role to play in driving price trends in 2025," he said.

"For instance, there remains uncertainty around how the tariffs promised by an incoming Trump administration in the US would be implemented, and how they could reshape the global lithium landscape."  – Source: INN