Lithium Prices to Stabilize in 2025 as Mine Closures and China EV Sales Ease Glut

The global lithium market has been grappling with a significant supply glut, leading to a dramatic drop in lithium prices. However, analysts predict that the situation may begin to improve in 2025, as mine closures and increased demand from China's electric vehicle (EV) market help to ease the surplus. This article explores the factors contributing to the expected stabilization of lithium prices in the coming year.

In late 2024, Contemporary Amperex Technology Co. Ltd. (CATL), one of the world's largest battery manufacturers, announced the closure of its lithium mine in Jiangxi, China. This mine accounted for approximately 5% of the world's primary lithium supply and about 20% of China's supply. The closure, driven by rising production costs and falling prices, is expected to reduce China's monthly lithium carbonate output by 8%, or approximately 5,000 to 6,000 tons. This reduction in supply, along with other potential supply cuts, could help stabilize lithium prices in 2025.

China's EV sales growth in 2025 is expected to continue its robust trend, driven by economic stimulus programs and incentives for transitioning from gasoline-powered vehicles. This growth will have a significant impact on the lithium supply glut, as EVs account for a substantial portion of lithium demand. According to Benchmark Mineral Intelligence, lithium demand from EVs and energy storage systems is projected to grow by more than 30% year-on-year in 2025. This increased demand will help to absorb the surplus lithium supply, contributing to a more balanced market.

However, the extent to which this growth will alleviate the supply glut depends on the success of production cuts and the pace of new supply coming online. Analysts at UBS note that while the closure of CATL's mine will not drastically change the overall market surplus for 2025, a tighter supply situation could develop if other lepidolite producers in China follow suit. Additionally, further supply reductions may be necessary to address the anticipated market surplus in 2025.

In conclusion, the closure of CATL's lithium mine in Jiangxi, China, and the expected growth in China's EV market in 2025 are likely to contribute to the stabilization of lithium prices. However, the success of production cuts and the pace of new supply coming online will also play a crucial role in determining the extent to which the lithium market recovers in the coming year. Investors should closely monitor these developments and consider the potential benefits and challenges associated with the lithium market's evolution.