SHANGHAI (Reuters) – Lithium prices are expected to stabilize in 2025 after two years of sharp declines as closed mines and robust electric vehicle sales in China suck up excess supply, although the possibility of mines reopening could limit profits, analysts said and traders.
A nearly 86% drop in prices of the metal for EV batteries over the past two years from its peak in November 2022 forced companies around the world to mothball mines. But market participants say these closures mean vibrant demand should outweigh supply this year as China steps up policy support to boost sales in the world’s largest EV market.
Global lithium supply is expected to shrink by half to around 80,000 tonnes of lithium carbonate (LCE), compared to almost 150,000 last year, according to Antaike, China’s state-run commodity data provider.
“We expect to see a price recovery for lithium in 2025 as the 2024 curtailments, and the possibility of further curtailments, will significantly reduce the market glut,” said Cameron Hughes, battery market analyst at CRU Group, referring to the mine closures without providing further details.
China doubled EV subsidies in July and by mid-December, more than 5 million cars sold had benefited from the incentives.
China’s EV subsidies helped fuel a lithium price rally late last year and should continue to support prices into 2025, three analysts and two traders said.
“The revival of lithium business in the fourth quarter of 2024 can clearly be attributed to the policy of providing subsidies,” said a buyer at a mid-sized cathode material factory in China on condition of anonymity as the buyer was not authorized to discuss speak. to media.
Any price improvement will likely be felt by the end of 2025 as inventories are depleted and buyers return to the spot market, said David Merriman, research director at metals research firm Project Blue.
Project Blue expects prices to stabilize around an average of $11,092 per tonne by 2025. Guotai Juan, a Chinese broker, predicts a price range of 60,000 yuan ($8,184) to 90,000 yuan ($12,276).
The most traded lithium contract on the Guangzhou Futures Exchange last year traded between 68,250 yuan and 125,000 yuan per tonne.
However, analysts warned that any significant price increase this year is likely to be capped as production at many shuttered mines can be quickly scaled up if it proves profitable.
Merriman said potential U.S. policy changes under the incoming Trump administration, including new tariffs on EV battery imports from China or scaling back domestic EV incentives, could also pose risks to lithium demand.
($1 = 7.3312 )
