Investing.com — Daiwa Capital Markets said in a research note to clients this week that it forecasts a 12-28% increase in global lithium supply over the 2025-2026 period, driven by an increase in production from key regions such as Argentina, Australia, and Africa.
However, they warn that lithium prices are likely to remain under pressure due to oversupply. The current price of lithium carbonate equivalent (LCE) in China is around CNY78,000/ton, but Daiwa expects it to fall to CNY70-75,000/ton by 2025 due to increasing production from cheaper mines.
“[The] current lithium price [is] not low enough to prevent cheap mines from increasing production volume,” the company said.
Demand for lithium, especially from electric vehicles (EVs) and energy storage systems (ESS), is expected to decline.
EV battery demand growth is forecast to decline from 35% year-on-year in 2023 to 15-17% in 2025-2026, and ESS battery demand growth will also slow, from 42% in 2023 to 31-34% in 2025-2026.
Daiwa believes this slowdown, coupled with rising supply, indicates that lithium prices are likely to struggle to maintain their recent highs.
In terms of production, Argentina’s salt lakes are expected to increase lithium production by more than 80kt LCE by 2025, while African lithium projects should contribute more than 60kt LCE.
From Australian Tier-1 producers such as Wodgina and Mt. Marian is expected to ramp up production, but Tier-2 companies may face margin pressure and could cut production if lithium prices fall.
Despite a recent increase in lithium prices due to China’s ‘substitution subsidy’ policy, Daiwa believes this increase is unsustainable and expects further price declines in the first half of 2025.
As such, the company has downgraded Ganfeng to Underperform and maintains its negative view on other major lithium players, warning that “early bottom fishing in the lithium sector could be risky.”
