The price of lithium is experiencing a rebound as demand for electric vehicles in China rises. However, analysts at Bloomberg warned investors that the lithium market could still be in oversupply in 2025.
Spot prices for lithium carbonate in China have risen about 8 per cent since late October and are now at a three-month high, while the main lithium carbonate futures contract on the Guangzhou Futures Exchange has risen 14.56 per cent since November.
The Chinese government is introducing measures to expand subsidies for electric vehicles, a move that has fuelled the start of a rally in the metals sector, which is crucial to energy transition. Some market participants speculated that Trump’s election win could encourage Chinese battery makers to snap up lithium ahead of a possible trade war.
Demand for lithium carbonate in November was stronger than the market expected for year-end off-season, said Zhang Weixin, an analyst at China Futures Co. He added that China’s subsidies have acted as a positive stimulus, and battery makers may rush to export before trade barriers are implemented.
Analysts at China’s Huatai Futures believe that strong demand may push lithium prices to continue to rebound by the end of the year. But in the long term, between the year of 2024 to 2026, global lithium carbonate market’s will still be surplus, lithium prices in 2025 may continue to oscillate to find the bottom, with inflection point expected to arrive in 2026.
According to industry experts, although China’s electric vehicle demand has rebounded, the short-term demand outlook for electric vehicles globally remains bleak due to automakers delaying the launch of new products, and the rise of protectionism may drag down consumption in the long term, the market surplus situation has not yet undergone a fundamental shift.
Leah Chen, head of the battery metals team at S&P Global Commodity Insights, said China’s recent stimulus measures appear to have boosted consumer confidence. Some cathode manufacturers have returned to the market to replenish inventories that have dwindled over the past few months.
On the supply side, a prolonged downturn in the lithium market this year – with prices still mired at less than a fifth of their peak at the end of 2022 – has led to mine closures or cost-cutting in Australia, China and elsewhere.
According to CRU Group, 190,000 tonnes of lithium mine capacity has been curtailed since the end of 2023, with a further 50,000 tonnes of projects forced to be delayed. Battery market analyst Cameron Hughes said CRU Group had cut its supply forecast for next year by 14 per cent. He noted that the lithium market has “tightened significantly”, but CRU still sees an oversupply next year, given weaker demand growth.
Dan Lashof, US director of the World Resources Institute (WRI), said after Trump’s victory that world leaders would confirm that they would not renege on climate goals. Trump’s return to the White House is unlikely to stop the growth of clean energy in the US, which has been accelerated by bipartisan support for wind, solar and battery projects, fuelled by recent federal investments.
