Lithium and nickel salts price recovery faces uncertainty amid weak fundamentals in Q1

Lithium and nickel salts price recovery remains uncertain as weaker fundamentals persist in Q1.

Since its launch in October 2023, Platts battery-grade lithium salts assessments have seen a steady downtrend with only minor, short-lived rebounds. With the global fundamentals for the lithium market not expected to improve in the near term and Europe facing additional battery scale-up hurdles, the beginning of 2025 may bring more of the same destocking and spot price pressure seen in Q4.

According to S&P Global Commodity Insights data, the year 2024 was undeniably difficult for lithium carbonate producers, with their prices dwindling above 30% between January and late December. In comparison, lithium hydroxide has done even worse in 2024, having fallen 38% and also losing its premium over lithium carbonate.

The average assessment for European lithium carbonate in December 2024 was $10,555/mt CIF Europe, down from $17,711/mt in December 2023. The average assessment for lithium hydroxide in December 2024 stood at $9,590/mt, down from $17,811/mt CIF a year earlier.

Short-term spot lithium prices remain under pressure

In terms of short-term spot prices, pressure is expected to grow in Q1 2025 compared with Q4, a large producer said.

"Overall procurement is strongest in Q3 going into Q4. We will see lower activity in Q1 due to reduced demand for electric vehicles. Supply curtailment is inadequate; it takes time to achieve balance. The lowest price we saw was in October and September this year, so I won't be surprised if we see that level again in Q1, as some destocking is likely before the Lunar holidays," the producer said.

"Looking forward, I think prices might decline further in Q1," a buy-side source in Europe predicted. He added that traded volumes were already quite small compared to when the market was stronger.

Another producer was hoping that the market would hold in Q1, allowing the Asian lithium carbonate to fetch slightly above $11,000/mt CIF North Asia. For battery-grade lithium hydroxide, he predicted $10,250-$10,500/mt CIF North Asia in Q1 2025.

"Prices seem to be ticking up a bit, but only a bit. Curious to see what the Chinese are up to this year," a lithium supplier said.

In the longer run, lithium salts prices are set to remain under pressure throughout 2025, with S&P Global Market Intelligence(opens in a new tab)'s December 2024 forecast estimating the average lithium carbonate equivalent price in 2025 at $10,566/mt CIF North Asia. The LCE average price is expected to rebound only in 2026 and continue its uptrend into the 2030s.

The lithium market is also likely to see a gradual increase in spot trade activity as more capacity and demand are emerging, particularly in the nascent European and North American markets. This, together with a growing interest in hosting bidding events for lithium by major suppliers, is expected to bring more transparency to the generally opaque battery-grade lithium market.

Accelerated LFP battery growth pressures lithium hydroxide prices

Although the discount for lithium hydroxide over lithium carbonate has contracted in recent weeks, several industry players said lithium hydroxide prices are unlikely to regain their premium over lithium carbonate in the near future amid a growing focus on lithium-iron-phosphate battery chemistry, which uses lithium carbonate. High-nickel battery chemistries use lithium hydroxide, and while they hold a large market share, they are growing more slowly.

"We're not very optimistic for nickel-manganese-cobalt (NMC) cathode orders in January and February next year and part of the NMC demand from EVs has been replaced by the LFP battery. LFP cathode orders will keep increasing in January 2025 because the Chinese are trying to export as much as possible before February, and demand from ESS continues to improve," an Asian cathode producer said.

"Yes, even I am not positive enough to believe lithium hydroxide could fully recover [in Q1]," one producer said.

Another producer shared the same outlook for lithium hydroxide. However, with some Chinese hydroxide producers retrofitting to produce more lithium carbonate, the market should approach some balance on the supply side, he said. "You definitely have to look closely at Korean lithium hydroxide output, as this will be a good indication of price trends for BGLH," he added.

Europe has also taken a more decisive course in adopting more LFP technology in 2024, as shown by the recent deal between Stellantis and CATL to build an LFP battery plant in Spain. Similarly, France's Renault Group announced in July 2024 that it would source LFP batteries from the LGES plant in Poland.

The recent announcement to shelve the lithium refinery project Aurora in Portugal and Northvolt's bankruptcy in Sweden indicate the struggles in building the lithium battery supply chain in Europe. In 2024, Vulcan Resources and AMG Lithium hydroxide plants were both launched in Germany.

A few more mining and/or refining projects are underway, set to start in 2025, with additional projects set for 2026-2028. However, with very slow growth in local lithium salts production, the European market is expected to remain dependent on lithium and cathode material imports in the foreseeable future, driven by contract and spot prices in Asia. "It will be a good year, and hopefully Europe will realize it is mandatory to build its own supply chain," a European lithium market source said.

Nickel sulfate outlook

The Platts European nickel sulfate premium IW Rotterdam has been relatively rangebound since its launch in December 2023 at $2,200-$2,650/mt.

Nickel sulfate is one of the key raw materials for producing NMC batteries predominantly used in EVs and in growing ESS applications

While the uptake of EVs has grown year over year, the growth rate has not met expectations. This has led to high inventories and oversupply across the entire battery value chain, from battery raw materials to EVs. Consequently, nickel sulfate prices have remained subdued due to weak downstream demand from NMC cathode makers.

Despite the nickel market remaining fundamentally oversupplied and spot prices staying relatively stable, various headlines throughout 2024 impacted the LME Nickel cash daily price. For example, the US and UK imposed sanctions on April 13, banning Russian metal from the LME and CME. New Caledonia, the fourth-largest producer of nickel, saw imports fall 22% from May to June as mines shut down amid social unrest. During the same period, some Indonesian nickel ores were pending final RKAB permit approvals, while the rainy season affected mining activity, tightening the nickel ore supply. In the interim, Indonesia imported ore from the Philippines to compensate for the shortfall. Other major headlines include BHP suspending its Nickel West and West Musgrave operations, while Ambatovy Minerals temporarily shut down a slurry pipeline in Madagascar following an incident.

Expectations are that prices will remain bearish in 2025 as the global nickel market stays oversupplied. Market participants have expressed pessimism about the near-term outlook but ultimately expect prices to remain supported by costs.