COMMODITIES 2025: Global surplus, declining prices weigh on Europe's lithium ambitions

This is part of the COMMODITIES 2025 series where our reporters bring to you key themes that will drive commodities markets in 2025.

The immediate outlook for Europe's lithium industry is clouded by challenging market fundamentals, driven by a surge in global lithium production and a slowdown in battery electric vehicle sales.

In the Lithium and Cobalt Commodity Briefing Service November report, S&P Global Commodity Insights analysts forecast a global surplus of approximately 33,000 mt of lithium carbonate equivalent in 2025, a decrease from the 84,000 mt surplus projected for 2024 and 2023's 120,000 mt. This surplus is set to narrow significantly through 2027 due to upcoming lithium supply cuts.

In this context, the annual average price for lithium carbonate (minimum 99.5% CIF North Asia) is projected to drop to around $10,542/mt in 2025, down from an estimated $12,374/mt for 2024 and significantly lower than the 2023 average of $40,579/mt.

Platts, part of S&P Global Commodity Insights, assessed seaborne lithium carbonate at $10,500/mt CIF North Asia Dec. 17, down 30% since the start of 2024.

In Europe, Platts assessed battery-grade lithium hydroxide at $9,400/mt CIF Europe Dec. 16, down 62% since the price assessment launch in October 2023.

According to Commodity Insights analysts, Arcadium Lithium is due to put its Mt. Cattlin operation in Western Australia into care and maintenance from mid-2025, although they said it remained to be seen what happened with two other high-cost concentrate operations, Nemaska and North American Lithium, both in Canada, with NAL's two owners, Sayona Mining and Piedmont Lithium, merging to minimize costs.

"The likelihood of more protectionist trade policy and repeal of the US EV tax credit may further dampen demand and price support for Canada's lithium output," the analysts said.

In the December Commodities Compendium, Macquarie analysts forecast a global surplus before recycling of 48,000 mt in 2025, down from an estimated 58,000 mt in 2024, with this falling to 2,000 mt in 2026. Taking recycling into account, they forecast the global surplus to be 91,000 mt in 2025, slightly lower than 2024's estimated 92,000 mt and falling to 60,000 mt in 2026.

"With the production cuts announced so far having primarily been about slowing future growth rather than immediate production, strong mine supply growth is still expected in the short-term, namely 24.7% in 2024 and 17.4% in 2025," the Macquarie analysts said.

"This suggests lower prices will need to persist for longer in the absence of any further price-induced cuts that rebalance the market sooner than our forecasts indicate," they added.

More balanced market

Cornish Lithium CEO Jeremy Wrathall told Commodity Insights said he hoped the market would return to being more balanced.

"What's happening now is that, that deficit is coming forward because of projects that are not getting funded that should get. I mean, if you look at Europe, there's virtually nobody who's going to come into production on time," he said.

"I think the market is swinging back into balance. I'm hearing people starting to talk about going into deficit much quicker and prices swinging back up potentially quite quickly," Wrathall said.

He also expressed his hope that prices would not rise as high as $82,000-85,000/mt, as even if this happened briefly, it would cause valuations to "go through the roof " and attract too much interest in new projects, which would eventually lead to an oversupply.

"I think that we're coming back to a reality where the incentive price for lithium is well over $20,000/mt. If you look at the cost curve, future cost curves, that's telling you that, that incentive price is well over $20,000/mt," he said, adding that currently 60-70% of the cost curve was not making any money, including the large Greenbushes mine in Australia, which had scaled back production.

Not a market in decline

Meanwhile, Savannah Resources Chairman Rick Anton said in his year-end statement that the spodumene concentrate price has shown a modest improvement from its August lows, while global EV sales have actually risen 25% year over year in January to November to 15.2 million vehicles, with good signs of a reacceleration coming in Q4 2024.

"Clearly, these are not the statistics of a market in serious decline," he said, adding there was a lot to look forward to in 2025.

"Yes, there is short term uncertainty in the outlook for lithium prices and the pace of development of the energy transition. However, as a pre-production lithium company with a very competitive and valuable resource, I believe Savannah is largely insulated from these issues and can focus firmly on the tasks it has to execute," he said.

Savannah aimed to progress its Barroso lithium project in Portugal as quickly as possible to be ready to take advantage of the more favorable conditions and higher prices, which Anton said would return to the market in the future.

Barroso is expected to begin production by late 2026 and produce around 191,000 mt/year of spodumene concentrate over a 14-year mine life.

"My confidence in this recovery is sustained due to the lithium market's secure foundation, which is built upon emission reduction-related legislation in all major global markets and the established position that lithium-ion batteries have achieved as the energy storage technology of choice for multiple applications," Anton said.

Wrathall pointed out that the lithium market was an "immature" market that had seen quick growth, but it had not seen a mega-scale lithium deposit emerge in the same way as nickel in Indonesia.

"Somehow, we've got to supply a market that's going from 1 million mt/year now to 3 million mt/year by 2030, which is only five years away, so somehow, we've got to do that," he said.

Currently, there are no operating lithium mines within the EU, although five projects are in planning or development stages, including Barroso.

Meanwhile, in September, AMG Lithium commissioned the first of five 20,000 mt/year modules at Europe's first lithium refinery in Bitterfeld, Germany.