Lithium Market Faces Price Decline Amid Oversupply and Weaker Demand

The lithium market is experiencing a sharp price drop due to increased global supply and weaker demand. In February 2025, lithium carbonate CIF North Asia prices fell below $10,000 per metric ton, marking a 4.5% decline to $9,550/t, the lowest level since February 2021. Analysts anticipate further production cuts throughout 2025 to stabilize the market.

The decline is primarily attributed to strong production growth in Chile and a post-holiday demand slowdown in China. Additionally, new lithium projects in Mali and Argentina are adding to the global supply, intensifying downward price pressure.

Key Factors Driving Lithium Price Decline:

• Oversupply: Chile’s lithium exports surged by 22.8% in January 2025, and Mali’s new mines, Bougouni and Goulamina, are expected to contribute 40,528 metric tons of lithium carbonate equivalent (LCE) in 2025. Argentina’s Mariana brine project, operated by Ganfeng Lithium Group, adds another 17,420 metric tons of LCE annually.
• Weaker Chinese Demand: Lithium demand in China declined sharply in early 2025 due to the Lunar New Year slowdown and a shift towards lithium iron phosphate (LFP) batteries, which require less lithium.
• Policy Uncertainty in the U.S.: Potential tariffs on Canadian energy exports and reconsiderations of the Inflation Reduction Act (IRA) could impact North America’s lithium supply chain and investment outlook.
• EV Market Adjustments: Slower-than-expected electric vehicle (EV) adoption and reduced government incentives are affecting lithium demand, contributing to declining battery prices and a more competitive EV market.

Industry Reactions to Falling Lithium Prices: Major lithium producers, including Albemarle and SQM, are cutting production to curb further price declines. Some mining companies are delaying new projects, while smaller lithium miners face financial struggles, leading to halted operations or consolidation efforts. In December 2024, Rio Tinto acquired Arcadium Lithium for €6.2 billion, strengthening its market position amid the ongoing price slump.

Despite the current challenges, industry experts anticipate long-term growth in lithium demand driven by EV expansion and green technology developments. However, oversupply may keep prices subdued until the next decade, with a potential market shift expected by the early 2030s.