Investing.com -- Daiwa Capital Markets said in a research note to clients this week that it forecasts a 12-28% increase in global lithium supply over 2025-2026, driven by a rise in output from key regions such as Argentina, Australia, and Africa.
However, they warn that lithium prices are likely to remain under pressure due to an 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] current lithium price [is] not low enough to stop low-cost mines increasing production volume,” said the firm.
Demand for lithium, especially from electric vehicles (EVs) and energy storage systems (ESS), is expected to slow.
EV battery demand growth is forecasted to drop from 35% YoY in 2023 to 15-17% in 2025-2026, and ESS battery demand growth will also decelerate, dropping from 42% in 2023 to 31-34% in 2025-2026.
Daiwa believes this slowdown, combined with rising supply, suggests that lithium prices will likely struggle to maintain their recent highs.
In terms of production, Argentina’s salt-lake brines are expected to increase lithium output by over 80kt LCE in 2025, while African lithium projects should 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 could cut production as lithium 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 such, 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.”