After years of rapid expansion, the global electric vehicle (EV) industry faced a challenging 2024, which also impacted lithium demand. Despite robust EV sales in the Asia-Pacific region, growth in the Americas slowed significantly, while Europe saw a decline, leading to a substantial slowdown in global lithium demand.

The lithium market’s difficulties were compounded by an oversupply issue. The influx of new production, especially in Australia and other regions, caused prices to plummet by roughly 80% from their peak. However, experts predict a potential recovery in 2025, driven by improved EV market dynamics and adjustments in lithium supply.

Regional Dynamics and EV Market Outlook

The Asia-Pacific region, led by China, remains a driving force in global EV sales. EVs now account for more than half of all vehicle sales in China, a trend expected to continue. Beijing’s economic stimulus programs and incentives for transitioning from gasoline-powered vehicles are likely to boost EV adoption further in 2025.

In the Americas and Europe, recovery prospects are more uncertain. The European Union’s trade restrictions on Chinese-made vehicles and the incoming U.S. administration’s potential tariffs and climate policy rollbacks create unpredictability. However, stricter CO2 regulations in Europe starting in 2025 may encourage automakers to expand affordable EV offerings.

Tesla, a key player in the EV market, plans to ramp up production by 500,000 units in 2025 with the release of a low-cost passenger car and a highly anticipated robotaxi. Battery affordability, driven by lower material costs, could also support demand across all regions.

Shifting Battery Chemistry Trends

The market for lithium battery chemistries continues to evolve. Lithium-iron-phosphate (LFP) batteries, which are nickel- and cobalt-free, are gaining popularity over nickel-cobalt-manganese (NCM) batteries. This shift benefits lithium carbonate over lithium hydroxide, though regional variations exist.

Beyond EVs, lithium demand for energy storage systems is growing rapidly. In 2025, these systems are expected to account for 13% of total lithium demand, with year-on-year growth projected at 45%.

The lithium supply chain faced significant disruptions in 2024. Oversupply issues were exacerbated by delays in adjusting production levels to match market realities. High-cost producers in China and Australia struggled to remain viable, leading to some supply cuts.

In China, lepidolite production—a significant source of lithium—declined sharply in late 2024 as high-cost operations became unsustainable. Production halved from its mid-year peak, and further reductions are expected in 2025.

African lithium projects, particularly those in Zimbabwe, have faced efficiency and cost challenges due to rushed development during the last price boom. Several operations, such as Sinomine’s Bikita mine, have shut down, while others face uncertain futures without price recovery.

In Australia, most hard rock lithium miners, except Greenbushes, struggled with cash flow issues in 2024. Companies such as Mineral Resources and Pilbara Minerals placed operations into care and maintenance. Future supply expansions, including projects by Arcadium and Rio Tinto, are being delayed to preserve capital.

South American brine-based lithium producers continued to perform well. Projects in Chile and Argentina are poised to expand production in 2025, supported by advancements in direct lithium extraction (DLE) technology. However, the scalability of these projects remains a concern.

Price Outlook for 2025

Lithium prices are expected to recover modestly in 2025. China’s lithium chemical inventories doubled in 2024, exerting downward pressure on prices. However, inventory levels are expected to normalize in the first half of 2025 if high-cost production continues to decline.

A projected surplus of 115,000 tonnes of lithium carbonate equivalent (LCE) next year should prevent significant price spikes. Still, prices are unlikely to drop further, with current spot prices hovering at $10–$11 per kilogram.

Major production increases are expected from new mines such as Liontown Resources’ Kathleen Valley in Australia and Ganfeng’s Goulamina in Mali. However, if prices remain subdued, more high-cost operations may shut down.

Swing supply, which can dampen price rallies, will play a crucial role in stabilizing the market. Restarting idled capacity in Australia, China, and Zimbabwe requires sustained higher prices, estimated at $15,000–$20,000 per tonne of lithium carbonate. However, structural supply deficits are likely to emerge before such restarts become feasible.

By 2025, the lithium market is expected to stabilize through production cuts, delays in new projects, and strategic stockpiling. Strong demand growth, particularly from the EV and energy storage sectors, will drive modest price recovery, signaling a more balanced future for the industry.

The above references an opinion and is for information purposes only. It is not intended to be investment advice. Seek a licensed professional for investment advice. The author is not an insider or shareholder of any of the companies mentioned above.