The Lithium Glut Could Persist Until 2027

Authored by Tsvetana Parskova via OilPrice.com,

• Lithium prices have dropped sharply, prompting production curtailments in Australia and China but not in Africa, where Chinese-owned mines maintain output.

• The global lithium market remains oversupplied, with UBS forecasting imbalances until at least 2027 despite recent production cuts.

• China’s strategic focus on EVs and low-cost lithium ensures continued mining, while a potential restocking phase could eventually boost prices.

This year’s plunge in lithium prices has forced curtailments in production in China and Western Australia as lithium miners look to limit losses and reduce the oversupply hanging over the market and prices. 

However, the lithium glut has not gone away and the market could remain oversupplied until 2027, analysts say. 

One of the reasons for a persistent glut could be the fact that while producers in Australia and, to some extent, in China, are curtailing output and delaying project ramp-ups, lithium mines in Africa owned by Chinese battery makers are not reducing supply. 

The mines, especially those in Zimbabwe, continue to operate as Chinese battery makers continue mining operations to have low-cost lithium supply and maintain market share, industry insiders and analysts have told Reuters. 

As a result, the market will continue to be oversupplied for the next two years, and not find balance until 2027, according to UBS. 

The bank still expects lithium supply to have increased by 25% this year and to rise by 15% next year, according to its estimates cited by Reuters.

The supply boost is expected despite the recent curtailments at lithium mines in Australia.

Global lithium miners have moved to curtail production and shrink their workforce—at least until market conditions improve.

Last month, Australian miner Mineral Resources said it was shutting down its Bald Hill lithium mine amid a crash in lithium prices in another project curtailment in the industry.

The low lithium prices have hit other producers and projects, too.

Australia’s Liontown Resources said it would reduce production from its Kathleen Valley lithium project, “to prioritise higher margin ore at reduced costs to adapt to the low-price lithium environment.”

Pilbara Minerals has also announced a suspension of a lithium processing plant in Western Australia.

The world’s largest lithium producer, North Carolina-based Albemarle, booked a net loss of $1.1 billion for the third quarter amid lower pricing in the lithium value chain.

As part of measures to reduce costs and operations, Albemarle will be reducing its global workforce by an expected 6-7% and is slashing its 2025 capital expenditures by around 50% versus 2024 to an anticipated range of $800 million to $900 million.

The reduction in some Chinese lithium supply is being replaced by output in Africa, which is serving the growing Chinese market, Albemarle’s chief commercial officer, Eric Norris, said on the company’s Q3 earnings call last month.

“It is a fragmented market. It is a market with significant Chinese presence today. And it’s a market where you have a lot of young companies whose sole reason for existing is to raise a lithium project,” Norris said, commenting on why more supply hasn’t been curtailed.

It could take longer for this market to rebalance, he added. 

Many mines supplying Chinese battery makers wouldn’t close amid the price plunge because they are integrated into downstream supply chains, analysts told Reuters.  

EV manufacturing and sales is a strategic priority for China’s government, which would like to have cheap lithium supply flowing.  

And China’s electric vehicle sales are surging. November marked the fifth consecutive month in which battery electric vehicles and plug-in vehicles outsold gasoline passenger cars.

China’s most recent rebound in demand has pushed local lithium prices higher. But the fundamentals of the global lithium market haven’t changed much—supply continues to outpace demand, setting the stage for at least another year of oversupply and depressed prices, analysts say.

However, an expected phase of restocking of processed lithium for batteries could rebalance the market faster, according to Will Adams, head of base metals research at Fastmarkets, a commodity price reporting agency.

“We’re probably going to be stepping in and out of deficits for a while, but as the deficits get closer, look out for the restocking phase as that can really give prices a boost,” Adams said on a recent webinar on the global outlook for the battery raw materials market in 2025.