Lithium market could see modest recovery in 2025

As the global energy transition accelerates, the lithium industry remains a cornerstone of the future, navigating challenges and seizing opportunities in an evolving market landscape.

After a tumultuous year in 2024, the global lithium industry looks ahead to a year of recalibration and cautious optimism. The electric vehicle (EV) market slowdown, particularly in the Americas and Europe, coupled with an oversupply of lithium, led to a sharp decline in prices—approximately 80% below their peak. Despite these challenges, emerging trends and strategic shifts point to a potential recovery for the sector in 2025.

EV Market Performance: A Mixed Bag

While the Asia Pacific region, led by China, maintained robust growth in EV sales, the Americas experienced stagnation, and Europe saw a contraction in demand. This uneven performance significantly impacted global lithium consumption. However, Asia Pacific is expected to remain the primary driver of EV growth, with China leading the charge. In 2025, EVs are anticipated to constitute more than half of all vehicle sales in China, bolstered by government incentives and economic stimulus programs.

In contrast, the U.S. and European markets face uncertainties. Trade restrictions on Chinese-made vehicles by the European Union and the incoming U.S. administration's proposed trade tariffs could create hurdles. However, stricter CO2 standards in Europe and Tesla's plans for an affordable EV and robotaxi may rejuvenate demand.

Battery Technology Shifts and Expanding Applications

The transition to nickel- and cobalt-free lithium-iron-phosphate (LFP) batteries is reshaping lithium demand. These batteries, which favor lithium carbonate over lithium hydroxide, are expected to gain further market share. Additionally, the growing popularity of plug-in hybrid electric vehicles (PHEVs) in China, with their larger battery packs, has provided some relief to lithium demand.

Beyond EVs, the energy storage sector is a rising star. In 2025, lithium demand for energy storage systems is forecasted to grow by 45% year-on-year, accounting for 13% of global lithium consumption. This surge underscores the sector's increasing significance in the broader energy transition.

Supply Adjustments Amid Price Challenges

The lithium supply landscape is undergoing significant adjustments. Australian producers, grappling with high costs, are scaling back operations. Notably, Mineral Resources placed its Bald Hill mine under care and maintenance in 2024, while other projects faced similar fates. In Africa, rushed developments are showing cracks, with high-cost operations struggling to remain viable amid depressed prices.

In China, the strategic curtailment of lepidolite production has halved output since mid-2024, signaling a shift toward market stability. Direct lithium extraction (DLE) technology, which promises higher recovery rates and shorter production times, is also gaining traction, particularly in South America. Chile and Argentina are set to lead brine-sourced lithium expansions, supported by DLE advancements.

Price Recovery on the Horizon?

Lithium prices are expected to stabilize modestly in 2025, provided high-cost production continues to taper off. An anticipated surplus of 115,000 tonnes of lithium carbonate equivalent (LCE) will likely cap any significant price rallies. However, structural supply deficits may emerge, creating opportunities for recovery in the latter half of the decade.

Key projects, such as Liontown Resources' Kathleen Valley mine in Australia and Ganfeng's Goulamina mine in Mali, are poised to contribute to supply growth. Yet, operational and financial challenges could hinder ramp-up efforts, particularly if prices remain low.

Outlook for 2025 and Beyond

In 2025, global lithium demand is projected to grow by 26%, reaching 1.46 million tonnes LCE, while supply is expected to rise by 16% to 1.58 million tonnes. This delicate balance between supply and demand highlights the industry's ongoing adjustments. With supportive policies, technological advancements, and a rebound in EV sales, the lithium market may see modest recovery and renewed stability in the years ahead.