After undergoing a turbulent couple of years with periodic adjustments, many industry experts remain pessimistic about the fate of lithium prices in 2025. The ongoing oversupply of lithium and the potential for mines to restart operations once prices show signs of recovery mean that this essential battery material is unlikely to see a significant rebound this year.

Since the end of 2022, lithium prices have plummeted significantly, driven down by excessive supply and disappointing demand from the electric vehicle (EV) sectorThe cumulative decline over the last two years has reached nearly 85%. This crash has led to the shutdown of several lithium mining operations and put many producers under immense financial pressure.

At present, most analysts predict that oversupply will continue this year, although they anticipate that the surplus will be less than that of the previous year

The market's fluctuations have piqued interest across various sectors, particularly as the global lithium battery industry garners increased attention.

According to detailed statistics collected by industry experts at Fastmarkets, Benchmark Mineral has made a bold prediction that lithium carbonate prices in North Asia might stabilize around $10,400 per ton this yearThis figure closely mirrors the expected price at the end of 2024, indicating a period of relative stability in the near-term marketFastmarkets also compiled opinions from analysts at four different institutions, arriving at an average forecast of $10,685 for lithium carbonate in 2024.

The reluctance of miners to cut back on supply or prematurely restart operations can be attributed to the anticipated long-term growth in lithium demand, driven by the accelerating energy transitionAdditionally, geopolitical tensions, including the potential for large tariffs, could further incentivize miners to continue their operations unabated.

Federico Gay, Chief Lithium Analyst at Benchmark Mineral Intelligence, stated, “This supply fluctuation may limit the upward potential for lithium prices in 2025, as a rapid restart of mining operations could exacerbate oversupply conditions beyond current predictions.”

Looking back to the previous year, the landscape of the global lithium industry was tumultuous, with many producers grappling with the challenges posed by intensifying market competition and rising costs

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These pressures have considerably squeezed profit margins, leading some companies to face existential crisesFaced with such dire circumstances, certain enterprises had no choice but to halt production to stem financial losses or postpone planned expansion projects, all in an effort to weather a harsh economic winterThese moves acted as a stabilizing agent for volatile lithium prices, allowing for a gradual recovery since mid-August as prices began to stabilize after a relentless declineHowever, despite this stabilization, the market remains trapped at low levels, with any significant price rebounds still distant.

As the industry cautiously stabilizes, new concerns loom largeStakeholders worry that if there are any signs of a rebound in lithium prices, previously dormant miners will likely spring into action, initiating another phase of aggressive expansionRegions like Africa and China, recognized for their abundant lithium reserves, established industry chains, and significant market potential, are anticipated to be at the forefront of this resurgence.

New supply sources are expected to emerge continually

Thomas Matthews, an analyst with CRU Group, highlighted Australia’s Greenbushes, Wodgina, and Pilgangoora projects as examples, stating that companies that had previously reduced output could restart operations within a month if market conditions allowThe balance of the market will hinge on whether these operations accelerate or if more supply cuts occur.

Benchmark Mineral anticipates that production rates in Zimbabwe, China, and Argentina will increase compared to last yearCRU Group similarly forecasts rapid growth in capacity in Mali and Brazil from an already low base.

A report from Bank of America in November stated, “New supplies continue to enter the market while high-cost operators at the margins have not closed down in massive numbersThis is partly driven by strategic or geopolitical reasons, with producers hesitant to cut back in an exponentially growing market.”

In the midst of this global surge towards renewable energy, the growth outlook for electric vehicle sales is clouded with uncertainties

The situation becomes particularly challenging in the U.S., where consumer preferences for traditional fossil fuels remain deeply entrenched, creating significant barriers to the widespread adoption of electric vehiclesThis persistent inclination among consumers is reflected upstream in the supply chain and has emerged as a critical factor contributing to downward pressure on lithium prices.

Market dynamics indicate that since November, some astute media outlets have swiftly adjusted their forecasts for electric vehicle sales in the U.S., scaling back what was once an ambitious expectation of 48% market share for EVs by 2030 to a more modest 33% projection.

Overall, the lithium market faces a complex landscape with intertwined dynamics of supply, demand, and geopolitical factorsAs producers navigate this fluctuating terrain, their decisions will significantly impact pricing and availability in the coming years