Lithium Supply to Increase, Prices to Remain Under Pressure, Says Daiwa Capital Markets
Daiwa Capital Markets has predicted a significant increase in global lithium supply over the next two years, driven by rising production from key regions such as Argentina, Australia, and Africa. However, the firm expects lithium prices to remain under pressure due to oversupply.
The current price of lithium carbonate equivalent (LCE) in China is around CNY78k/t, but Daiwa expects it to decline to CNY70-75k/t in 2025 due to increasing production from lower-cost mines. The firm believes that the current low price is not enough to stop low-cost mines from increasing production volume.
Despite strong demand from electric vehicles (EVs) and energy storage systems (ESS), Daiwa forecasts that the demand growth will slow down. EV battery demand growth is expected to drop from 35% year-on-year in 2023 to 15-17% in 2025-2026, while ESS battery demand growth will also decelerate, falling from 42% in 2023 to 31-34% in 2025-2026.
Daiwa believes that the combination of slowing demand and rising supply will make it difficult for lithium prices to maintain their recent highs. The firm expects Argentina’s salt-lake brines to increase lithium output by over 80kt LCE in 2025, while African lithium projects are expected to contribute more than 60kt LCE.
Australian Tier-1 producers like Wodgina and Mt. Marian are expected to ramp up production, but Tier-2 companies may face margin pressures and cut production as prices fall. Despite a recent rise in lithium prices due to China’s “replacement subsidy” policy, Daiwa believes this increase is unsustainable and expects further price declines in the first half of 2025.
As a result, the firm has downgraded Ganfeng to Underperform and maintains its negative outlook on other major lithium players, warning that “early bottom-fishing in the lithium sector may be risky.”
