Lithium Market Collapse: Is It the Turn of the Millennium?
In the heart of 2025, the lithium market is experiencing significant volatility, primarily due to oversupply despite robust demand growth. This situation, characterised by multi-year low prices and record supply increases, is expected to gradually move towards balance by late 2025 or early 2026.
The driving force behind lithium demand is robust and growing, primarily fuelled by the electric vehicle (EV) sector and stationary battery storage for renewable energy. Global EV sales surged 35% in Q1 2025 and are predicted to surpass 20 million units for the year, accounting for over 25% of total car sales. Lithium consumption in EVs is projected to grow about 12% annually through 2030.
The oversupply in the lithium market is a result of increased production, including an 8-9% surge in June 2025 lithium carbonate output. Inventories, particularly at Chinese ports, are high, with producer inventory at 22 days of consumption in June. This oversupply has depressed prices to unsustainable levels for new production incentives.
Analysts suggest that market rebalancing and price recovery may commence by late 2025 or early 2026. This could be triggered by inventory drawdowns, requiring at least a 50% reduction from current port stock levels, and possible voluntary production cuts if prices remain low through Q3 2025. Regional policy-driven demand acceleration in Europe and North America also plays a role in this anticipated market adjustment.
Despite the near-term oversupply and price softness, the long-term prospects for lithium stocks remain positive due to structural shifts towards renewable energy and electrification. Mining stocks are viewed as growth opportunities, aligned with the rapid global pivot to clean energy and EV adoption.
One leading lithium producer, despite being hard hit by the downturn, remains financially strong. The resource sector is in turmoil due to the lithium price drop, which has affected many producers and explorers. Government support programs in numerous countries are providing additional tailwind for the lithium sector.
Stationary battery storage for grid stabilization is gaining importance as a demand driver in the lithium market. Civilian air traffic is expected to double by 2040, potentially offering new opportunities for lithium demand.
Investors should watch inventory trends, production discipline by major players, and evolving demand from EVs and stationary storage to anticipate market shifts later in 2025 and beyond. The new issue of DER AKTIONÄR features a lithium stock that is the top pick of the week by commodity expert Markus Bußler and explains why one should bet on the lithium sector's trend reversal.
The renewable-energy sector, particularly the electric vehicle (EV) industry, is predicted to bolster its demand for lithium, with global EV sales projected to surpass 20 million units in 2025, driving an annual growth of approximately 12% in lithium consumption through 2030. On the other hand, the lithium finance industry is currently grappling with unsustainable lithium prices, instigated by an oversupply in the market driven by increased production and high inventory levels at Chinese ports.
