In 2025, the lithium market is witnessing a resurgence following a period of uncertainty, with lithium playing a crucial role in electric vehicle (EV) batteries and consumer electronics, essential for the clean energy transition. The global lithium market is influenced by factors such as the growth of EVs, supply fluctuations, and geopolitical tensions, shaping the landscape for lithium in the current year and beyond.
The surge in electric vehicle sales, including both battery electric vehicles (BEVs) and plug-in hybrid electric vehicles (PHEVs), has been a significant driver of lithium demand. In 2024, global sales of plug-in electric vehicles reached 16.5 million units, marking a substantial 28.5% increase from the previous year, with China leading the charge, accounting for 86% of the global rise in sales. The US and the European Union also played roles in this growth, albeit to varying degrees, highlighting the global shift towards electric mobility.
The transition to electric vehicles is crucial for reducing global carbon emissions, offering a cleaner alternative to traditional internal combustion engine vehicles. As more consumers embrace electric vehicles, the demand for lithium, a key component in EV batteries, continues to soar, underscoring the importance of lithium in the transition to sustainable transportation.
Lithium prices have experienced volatility, with a recent upturn observed in early 2025. The price of lithium carbonate, a vital component in batteries, rose by 4.5% in January 2025, driven by increased demand for restocking ahead of the Lunar New Year holidays. Supply constraints due to maintenance at lithium refineries have also contributed to the price hike. Despite this short-term rebound, the overall outlook for lithium prices remains cautious, with expectations that prices will stabilize within the range of $10,000 to $11,300 per ton through 2029, as supply growth potentially outpaces demand in the near term.
Geopolitical dynamics play a significant role in the lithium market, particularly in the rivalry between the US and China for dominance in EV and battery technologies. Both countries have implemented trade restrictions to safeguard their industries, with China recently proposing restrictions on lithium extraction and refining technologies to bolster its control over the global lithium supply chain, crucial for lithium-iron-phosphate (LFP) batteries. China’s rapid expansion in the electric vehicle market has led to a surge in its lithium reserves, positioning the country as a key player in the lithium market.
In response, the US is focusing on enhancing its domestic mining and refining capabilities, with initiatives aimed at streamlining permits for mining to boost lithium production. However, the process of developing new lithium mines in the US is slow, with an average timeline of around 16 years from discovery to production, posing challenges in meeting domestic lithium demand in the short run.
Beyond traditional lithium producers like Australia and Chile, new players are entering the market, with countries such as Saudi Arabia investing significantly in lithium projects. Saudi Arabia’s collaboration with local startup Lithium Infinity to extract lithium from brine underscores the country’s efforts to diversify its economy and strengthen its position in the EV and battery sectors, reflecting a broader global trend towards securing reliable lithium sources. African and European nations are also striking deals to develop their lithium resources, signaling a growing interest in expanding lithium production globally.
While the electric vehicle market is expanding rapidly, the lithium industry faces challenges ahead, including economic uncertainties stemming from factors like inflation and evolving government policies that could impact consumer spending and lithium demand. Policy shifts in key markets such as the US and Germany, driven by upcoming elections and changing priorities, may lead to fluctuations in demand for lithium, highlighting the need for stability and predictability in the industry.
Looking ahead, S&P Global anticipates a surplus in the lithium market in 2025, driven by continued supply growth outpacing demand. However, the latter part of the decade could see a shift towards a potential supply deficit, potentially driving prices higher. This outlook hinges on the sustained growth of global EV sales and the commitment of countries to reducing carbon emissions, positioning lithium as a critical element in the clean energy transition. Despite the current uncertainties, the long-term outlook for the lithium market appears optimistic, buoyed by strong demand from the electric vehicle sector as stakeholders strive to address climate-related challenges.
