Lithium Market Surplus Forecast Despite Production Cutbacks

Market balance is anticipated around 2027-2028, contingent on evolving economic conditions, geopolitical developments, and technological advancements in the electric vehicle sector.

The global lithium market is expected to face a surplus in 2024 and 2025, despite production cutbacks by key industry players in response to declining metal prices. According to the Chilean Copper Commission (Cochilco), the surplus is projected to reach 89,000 tons in 2024 and increase to 141,000 tons in 2025.

Global Lithium Supply Outlook

Chile, the world's second-largest lithium producer, plays a crucial role in the global supply chain. The country is home to major lithium producers, including US-based Albemarle and Chilean firm SQM, which are the only companies currently extracting lithium in the nation.

Cochilco's report highlights that despite cutbacks and slowed investment in new lithium projects, the market will remain in surplus for the next few years. However, supply and demand are expected to achieve a more balanced state by 2027.

Price Trends and Market Dynamics

The lithium market has seen a significant downturn, with prices plummeting by as much as 78% over the past year. In response, companies have scaled back production and slowed the development of both new and existing projects. The report suggests that lithium prices reached their lowest point between September and November 2023, potentially signaling market stabilization.

Cochilco estimates that Chile will produce approximately 285,000 metric tons of lithium carbonate equivalent (LCE) in 2024, with an increase to 305,000 tons in 2025.

Emerging Global Players

Other countries are expected to strengthen their presence in the lithium market. Zimbabwe is forecasted to produce 75,000 tons in 2024, accounting for about 6% of the global supply. Additionally, Mali's Goulamina and the Democratic Republic of Congo's Manono mines are poised to boost production significantly in the coming years.

Argentina is also emerging as a major lithium player, with production expected to exceed 100,000 tons by 2026. This growth is driven by large-scale projects and investor-friendly policies under President Javier Milei.

Geopolitical and Economic Risks

Cochilco's report warns of potential risks linked to the recent election of US President Donald Trump, who has proposed broad import tariffs that could impact global trade and economic growth. The report emphasizes concerns over ongoing trade tensions between the US, China, and the European Union, which could exert additional downward pressure on lithium prices.

"The results of the US elections are a major source of uncertainty for commodities, given the possibility of tariffs that may slow global economic growth," the report states. The heavy reliance on lithium demand from China, amid escalating trade disputes, remains a critical factor in market volatility.