The price of lithium recorded a small recovery due to the rebound in demand for Chinese electric vehicles and supply cuts. However, analysts warn that there is still likely to be a surplus of the battery metal in 2025.
Chinese lithium carbonate spot prices are up around 8% since late October and are now at a three-month high. Futures prices on the Guangzhou stock exchange are up 13% so far this week.
“The expansion of Chinese subsidies to encourage people to trade in their old cars has helped the metal’s nascent rally, which is crucial to the energy transition. Electric vehicle manufacturers in that country are on track to achieve ambitious annual sales goalswhile stock replenishment activity is picking up,” they expressed from the Bloomberg site.
«Demand for lithium carbonate in November has been stronger than market expectations for a typically slow year-end season,” said China Futures Co analyst Zhang Weixin. Chinese subsidies worked as an incentive and battery manufacturers are rushing to export before the imposition of trade barriers, he explained.
China’s recent stimulus measures appear to have boosted consumer confidence, said Leah Chen, head of the battery metals team at S&P Global Commodity Insights. “Various cathode manufacturers have returned to the market to replenish inventories which have been gradually reduced in recent months,” he noted.
On the supply side, a prolonged decline in the lithium market this year caused mines to close or cut costs in Australia, China and other countries. It is worth noting that prices remain stuck at levels that are less than a fifth of the peak at the end of 2022.
According to the consulting firm CRU Group, since the end of 2023, the capacity of lithium mines has been reduced by 190,000 tons and projects have been delayed by 50,000 tons. As a result, The consulting firm reduced its supply forecast by 14% for next yearexplained battery market analyst Cameron Hughes.
Despite the rebound in China, short-term global demand outlook for electric vehicles remains on the downsideas electric vehicle manufacturers delay new launches.
What should investors consider regarding the future supply of lithium?
Time.news Interview with Lithium Market Expert
Editor: Welcome, and thank you for joining us today. We’re excited to discuss the current trends in the lithium market. We’ve recently seen a rebound in prices, particularly linked to the demand for electric vehicles in China. Can you give us an overview of what’s happening right now?
Expert: Absolutely! The lithium market is definitely experiencing a mini-resurgence. Chinese lithium carbonate spot prices have surged by about 8% since late October, hitting a three-month high. This uptick is primarily due to increased demand from the electric vehicle sector, driven in part by government subsidies encouraging consumers to trade in their old vehicles.
Editor: It sounds like the Chinese market is playing a crucial role here. Can you elaborate on how the government’s policies are shaping the demand for lithium?
Expert: Certainly! The Chinese government has expanded subsidies aimed at promoting electric vehicle ownership, which has a domino effect on lithium demand. As more consumers trade in older vehicles for EVs, manufacturers ramp up production to meet ambitious sales targets. This growing market for electric vehicles is vital for the energy transition, making lithium even more important as a key component in batteries.
Editor: Interesting! However, there’s also some caution from analysts who expect a surplus of lithium by 2025. What are the factors contributing to this forecast?
Expert: Yes, while the current prices are recovering, many analysts are looking ahead and predicting a surplus. This expectation stems from the fact that lithium extraction and production processes are ramping up significantly. As many companies are investing heavily in lithium mining and processing capabilities, this addition to supply could outpace demand in the coming years, especially if the growth in electric vehicle sales doesn’t sustain its current pace.
Editor: So, while we see positive movements now, it might not be a long-lasting trend?
Expert: Exactly. Short-term dynamics can sometimes mask longer-term fundamentals. The current rally might be buoyed by effective policies and stock replenishment by manufacturers, but if the market expands too quickly or if demand from the electric vehicle sector plateaus, we could find ourselves with excess lithium in a few years.
Editor: That makes sense. What should investors and stakeholders in the industry be keeping an eye on moving forward?
Expert: They should monitor several factors: the pace of EV adoption, government incentives, and technological advancements in battery recycling. Also, keep an eye on geopolitical elements, as trade tensions and regulations can impact supply chains. Understanding these trends will be crucial for making informed decisions in what’s bound to be a fluctuating market.
Editor: Thank you so much for your insights today. It’s clear that while the lithium market is currently buzzing with activity, there are complex dynamics at play that could shape its future significantly.
Expert: My pleasure! It’s an exciting time in the lithium space, and staying informed will be key for everyone involved. Thank you for having me!