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Citigroup has lowered its lithium price forecast for the next two years by as much as 40%, citing slower battery demand growth and increased trade uncertainty, among other broader economic reasons.
Citi lowered its lithium carbonate and hydroxide price targets to $12,000 per tonne from $20,000 and 17,000 respectively. It also reduced its spodumene outlook from $2,000 to $1,200.
“With supply expected to improve in 2027 and uncertainty around next year’s demand elevated, consumers are likely to defer purchases and maintain lean inventories,” the bank said in the note released Friday, Bloomberg News reported. “Sentiment and positioning are likely to remain the dominant drivers in the near term, keeping risks skewed to the downside.”
The downgrade comes after different lithium projects and investments start to take-off, including Rio Tinto’s (ASX, LON: RIO) two new operations in Catamarca, Argentina. With more supply, the bank expects the market to reach some balance and a surplus for the next couple years as demand slows down.
Chinese market pressure
The most-active lithium carbonate contract on the Guangzhou Futures Exchange rose 1.2% to 91,160 yuan ($13,710) a ton on Monday. It has shed more than 40% since the end of August, according to Bloomberg.
Chinese lithium carbonate futures prices have been declining for the past ten months, especially after a deal with the European Union to cut hybrid cars exports increased concerns over demand prospects for the electric vehicle battery material.
Another potential source of downward pressure is CATL’s Jianxiawo mine in China, which has been an important driver of lithium prices since it was shut in August. The battery maker received environmental approval from local authorities last week, Bloomberg reported, potentially clearing the way for production to resume.
Long-term demand
Despite the weaker near-term outlook, lithium consumption is expected to triple by 2050, driven by the expansion of electric vehicles and energy storage systems.
That longer-term growth presents a challenge for the mining industry. While new production could create a temporary surplus, developers will still need to bring substantial additional capacity online to meet future demand.
The scale of that challenge is significant. The industry could require 134 new lithium mines and about $100 billion in investment to meet projected requirements, highlighting the tension between today’s weaker prices and tomorrow’s supply needs.
(With files from Bloomberg)