SHANGHAI (Reuters) - Lithium prices are expected to stabilise in 2025 after two years of steep declines as shuttered mines and robust electric vehicle sales in China soak up an oversupply, although the potential for mines to reopen may cap gains, analysts and traders said.
A nearly 86% plunge in prices of the EV battery metal over the past two years from its peak in November 2022 forced companies to mothball mines across the world. But market participants say those closures mean buoyant demand should outpace supply this year as China intensifies policy support to boost sales in the world's largest EV market.
The global lithium supply glut is predicted to shrink by half to around 80,000 tons equivalent of lithium carbonate (LCE) from nearly 150,000 last year, according to Antaike, China's state-owned commodity data provider.
"We expect to see a price recovery for lithium in 2025 as the curtailments seen in 2024, and the possibility of further curtailments, will significantly reduce the market surplus," said Cameron Hughes, battery markets analyst at CRU Group, referring to mine closures without giving further details.
China doubled EV subsidies in July and more than 5 million cars sold as of mid-December had benefited from the incentives.
China's EV subsidies contributed to a lithium price rally late last year, and should continue supporting prices in 2025, three analysts and two traders said.
"The uptick in lithium trade business in the fourth quarter of 2024 can be undeniably attributed to the policy of providing subsidies," a buyer at a mid-sized cathode material plant in China said on condition of anonymity as the buyer was not authorized to speak to media.
Any improvement in prices is likely to be felt towards the end of 2025 as inventories are used up and buyers return to the spot market, said David Merriman, research director at metals research company Project Blue.
Project Blue expects prices to stabilize around an average of $11,092 per metric ton in 2025. Guotai Juan, a Chinese broker, forecasts 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 traded between 68,250 yuan and 125,000 yuan per ton last year.
Analysts, however, cautioned that any significant price rise this year is likely to be capped as production can be swiftly scaled up at many closed mines if it proves profitable.
Merriman said that potential U.S. policy changes under the incoming Trump administration, including fresh tariffs on EV battery imports from China or slashing domestic EV incentives, may also pose risks to lithium demand.
($1 = 7.3312 Chinese yuan)