Demand from the electric vehicle (EV) market remains a key driver, with China maintaining its dominance after record-breaking sales in late 2024, while North American markets face uncertainty due to potential policy rollbacks under the Trump administration.
Meanwhile, geopolitical tensions continue to loom, with rising tariffs on Chinese EVs and escalating trade disputes reshaping global supply chains.
As 2025 unfolds, the lithium sector must navigate several complexities.
“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.
Although strong electric vehicle sales may offer some support, Berry cautioned that the next 12 months could be unpredictable in terms of 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 contract by 80 percent over the last two years evidences a bottoming of 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 and 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 during an interview with the Investing News Network (INN) in early December.
He went on to note for contrarian investors with a mid-to-long-term outlook, the current market presents a prime opportunity to re-enter the space.
After several years of oversupply 2025 is anticipated to see widespread production cuts aiding in the market’s ability to absorb excess supply.
Production cuts have already started inside and outside of China, as William Adams, head of base metals research at Fastmarkets told the INN via email.
“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.”
Adams and Fastmarkets expect to see demand catch up to production in late 2025. However, he did warn 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 build-up 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.”
Analysts at Benchmark 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 Benchmark Mineral Intelligence.
Megginson also referenced the output reductions in Australia and China, noting that they may not be as impactful as some market watchers have anticipated.
One of the plant’s two processing trains will be placed in “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,” he said. “Expect supply from these other regions to play a bigger role in the market in 2025.”
Geopolitics is likely to play a key role in this year’s lithium market directly and indirectly.
China responded with WTO complaints against Canada, the US, and the EU, labeling the measures protectionist.
Whether these tariffs are enough to bolster the domestic North American EV market remains to be seen, however, the issue could become more complicated if President-elect Trump makes good on his threats to levy tariffs on continental trade partners, Canada and Mexico.
Well, it’s unclear if the new president will look to implement tariffs on critical minerals like lithium, Del Real believes it’s unlikely, especially given the need for the materials and China’s dominance in the production of so many of them.
“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. And I don’t know that there is an appetite in the US for tariffs on a sustained basis,” he said, proposing that the threat of tariffs is a negotiating tactic.
More broadly, resource nationalism, near-shoring and supply chain security will play a prevalent role 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 made this realization and has spent two decades preparing for it.
He added: “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 full decoupling from China is even a good idea.”
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 cases, this has been driven by wanting to onshore the production of critical minerals that are necessary for defence 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 Trump tariffs could also serve as a catalyst for US 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 explained. “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 endeavours more challenging.”
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, cancelling some building projects or delaying decisions,” Adams from 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 new Texas plant ramps up,” he said.
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 said.
He also pointed to Chile’s efforts to partially nationalise 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.”
Undoubtedly the aforementioned factors will serve as headwinds or tailwinds to the 2025 lithium market. However, the most pronounced trend that will drive the lithium market is the EV sector, and to a slightly 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.”
He also noted that robust ESS demand is a positive signal for demand for LFP cathode chemistries but is unlikely to outweigh the mounting EV demand in China which will continue to account for an increasing domestic share of LFP cathode chemistries, said Megginson.
This sentiment was also echoed by Berry, 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,” said Berry.
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, like in China, the decline appears temporary, with recovery expected as stricter emissions penalties take effect in Europe in 2025, he explained.
Additionally, he pointed to the growing adoption of Extended Range EVs (EREVs), which address range anxiety and use larger batteries than PHEVs, as a catalyst for lithium demand, however, he noted the outlook for EVs in the US remains uncertain ahead of Donald Trump’s presidency.
“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 build out in India is strong, whereas demand for EVs is less strong, but again it is strong for 2/3 wheelers,’ said Adams.
He continued: “Also the low lithium and other BRM (battery raw materials) prices has lowered lithium-ion battery prices which has been good for ESS projects.”
Ultimately, the 2025 lithium market is expected to display volatility but could also present an opportune entry point for investors.
“I can see a 100 percent- 150 percent rebound in the lithium spot price easily in 2025, and again, I think there’s a lot of opportunity there,” said Del Real.
For Megginson, the 2025 market will be shaped by geopolitics and relations.
“Policy will have a huge role to play in driving price trends in 2025. 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,” he said.
Securities Disclosure: I, Georgia Williams, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: Beyond Lithium and Grid Battery Metals are clients of the Investing News Network. This article is not paid-for content.
The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.
Leave a Reply