TRADE REVIEW: Asian lithium prices may drop in Q2 2025 due to oversupply concerns

This report is part of the S&P Global Commodity Insights' Metals Trade Review series, where we dig through datasets and digest some of the key trends in iron ore, metallurgical coal, copper, alumina, cobalt, lithium, nickel and steel and scrap. We also explore what the next few months could bring, from supply and demand shifts to new arbitrages, and to quality spread fluctuations.

Asian lithium prices are expected to face pressure in the second quarter of 2025 due to an oversupply in the spot market from increased upstream spodumene production and ample lithium chemicals inventories, a surplus that may exceed potential growth in downstream cathode demand despite recent improvements in purchase orders.

Lithium prices began facing significant downward pressure after battery maker CATL resumed operations at its Jianxiawo-Lopal lepidolite mine in early February. This oversupply was exacerbated by the commencement of production at two greenfield projects in the same month: the Bougouni project and the Goulamina mine in Mali, which together contributed 40,528 mt of lithium carbonate equivalent, as well as Ganfeng Lithium's Mariana brine in Argentina that has an annual capacity of 17,420 mt lithium carbonate equivalent.

Furthermore, the current spot market remained well-stocked, adding to the supply glut.

Global lithium supply is projected to remain in surplus, with an oversupply of 83,000 mt lithium carbonate equivalent in 2025, according to Alice Yu, principal analyst at S&P Global Commodity Insights metals and mining research team.

"Consumers are holding high inventory levels. Our logistics [teams] even need to wait in line to enter the Guangzhou Futures Exchange warehouse because it is at full capacity," said a Chinese trader.

Lithium chemicals, spodumene prices fall

Several lithium converters and cathode makers reported holding two to four weeks' worth of inventory at the end of March.

Spodumene -- the main feedstock for lithium chemicals lithium carbonate and lithium hydroxide -- experienced a price decline in the first quarter, pressured by abundant supply and significant cost pressures for lithium converters.

Platts, part of Commodity Insights, assessed spodumene concentrate with 6% lithium oxide content as down 7.2% from Jan. 2 to $770/mt FOB Australia on April 15, while spodumene concentrate with 5.5% lithium oxide content was assessed at $700/mt CIF China.

Platts assessed spodumene concentrate with a 0.1% differential to 6% lithium oxide content at $12.83/mt FOB Australia on April 15. The value per 0.1% lithium oxide is considered linear for spodumene concentrate containing lithium oxide in the 5.5%-6% range.

Spodumene concentrate priced at $800/mt FOB Australia on March 28 was equivalent to a theoretical production cost of Yuan 73,647/mt for lithium carbonate, according to Platts data. This is inclusive of a Yuan 25,000/mt refining cost, 13% value-added tax and the dollar-yuan exchange rate. On the same day, lithium carbonate on a DDP China basis, was assessed at Yuan 73,800/mt, implying a slim margin for lithium converters of Yuan 152/mt or 0.2% for lithium carbonate production from spodumene purchased in the spot market.

"The chemical price is too low. Profit margins are not good, and we cannot do business at a loss," said a Chinese lithium converter.

Another Chinese producer said: "Everyone is waiting for a more suitable cost of production level."

"Lithium developers are continuing with reducing capital expenditure and pausing project investment. Lithium raw material producers are also under intensifying pressure to cut existing production," Yu said, estimating that at $9,202/mt, the lowest lithium carbonate CIF Asia price in 2025 in March, 26% of modeled lithium production is loss-making on a total cash operating margin basis.

In the lithium chemicals market, hydroxide prices were consistently lower than carbonate prices throughout the first quarter, with the discount ranging from Yuan 4,500/mt to Yuan 8,000/mt, according to Platts data. Market sources mainly attributed this discount to a shift in battery chemistry preferences and the declining market share of nickel-manganese-cobalt (NMC) batteries, which are the main consumers of lithium hydroxide, compared with lithium-iron-phosphate (LFP) batteries, which are cheaper to produce.

According to China's Automotive Power Battery Industry Innovation Alliance, NMC battery production was 23.8 GWh in March, with a market share of about 20.1%, while LFP battery production reached 94.3 GWh during the month, with a market share of 79.7%. This trend is expected to continue in the near term due to the emergence of cost-effective LFP batteries, which primarily consume lithium carbonate.

April cathode orders pick up

Market participants have been optimistic about lithium carbonate prices in the second quarter, driven by increased purchase orders for battery cathodes, a key component of batteries that directly influences the demand for lithium chemicals.

Total planned cathode orders in China for NMC and LFP batteries in April have increased by 11% to 12%, respectively, month over month, according to market sources, suggesting potentially higher demand for battery raw materials.

"We have seen a significant increase in lithium order volumes for the second and third quarters of 2025," said a South Korean battery maker, adding that this was "a good sign" for the industry grappling with oversupply.

Platts assessed the lithium carbonate price on a DDP China basis at Yuan 70,500/mt on April 15, down 4.7% from Jan. 2, while lithium hydroxide fell 4.3% to Yuan 66,500/mt over the same period.

In the first quarter, Chinese domestic lithium carbonate prices fluctuated between Yuan 73,200/mt and Yuan 78,500/mt ($10,201/mt and $10,920/mt).

Platts-assessed lithium carbonate prices on a DDP China basis peaked at Yuan 78,500/mt on Jan. 20. Market activity slowed as China closed for the Lunar New Year holidays from Jan. 28 to March 4. Prices declined as participants returned from the weeklong break. By the end of the first quarter, prices hovered in the Yuan 73,500-74,000/mt range.

In the seaborne market, spot liquidity for lithium in South Korea and Japan remained limited throughout the first quarter, as many battery manufacturers in these regions were predominantly covered by term contracts. However, a similar trend of optimism has been observed in these markets during the second quarter.

"We have been getting a lot of inquiries about lithium purchases lately, and the price is expected to increase in the second half of [2025], so they are stocking up now at a low price," a seaborne lithium converter said.