Lithium market faces surplus, project economics at risk

The lithium market has undergone dramatic fluctuations in recent years. Record price growth in 2022, when the price of lithium carbonate climbed above USD 80,000 per tonne, was followed by a collapse to levels around USD 10,000/t in 2025. The main reason is not weakening demand, but a sharp increase in supply, particularly from China, which has outpaced the growth of electric mobility and energy storage technologies. The result is a market surplus that could last until 2027 and threatens the economics of many projects.

Developments in the lithium market are a textbook example of commodity cyclicality. Low prices in 2020 discouraged investors from developing new capacity, leading to supply shortages and a meteoric rise in prices in 2022. Producers responded with a massive expansion of mining and chemical plants, but their full capacity will only come online with a time lag. This “delayed response effect” has now resulted in overproduction, pushing prices well below the economic viability threshold for many producers. China has played the largest role, with massive growth in the extraction of spodumene, lepidolite and brines, alongside rising lithium chemicals production capacity.