Lithium Market Poised for Recovery Amid Supply Cuts and Rising Demand

Bernstein analysts observe early signs of recovery in the lithium market, citing supply cuts and declining inventories as key factors that could stabilize prices. While substantial capacity expansions are expected in 2025, demand growth is projected to surpass capacity by 2026, creating a bullish outlook for lithium prices.

After peaking at $80,000 per tonne in 2022, lithium prices have dropped by over 85% to $10,000 per tonne—below the marginal cash cost of production. High-cost producers are cutting supply, which Bernstein analysts believe will support price stabilization. However, ample inventories and potential production restarts may limit price increases in the near term.

China’s lithium inventory has fallen from 130,000 tonnes in Q3 2024 to 100,000 tonnes, with inventory days declining from 40 to less than 30. Although this indicates improving supply-demand balance, inventory levels remain above the long-term average.

Bernstein forecasts lithium carbonate prices to average $12,000 per tonne in 2025, rising significantly to $20,000 per tonne in 2026 and $25,000 per tonne in 2027. These figures exceed current market expectations. The firm also predicts that capacity utilization will rise from 77% in 2025 to 89% by 2027, reflecting a tighter market.

Sichuan Tianqi Lithium Industries (SZ:002466), a leading lithium supplier, is highlighted as undervalued, with its share price reflecting a $12,000 per tonne long-term price, lower than Bernstein's $15,000 estimate. Historically, Tianqi’s share price trends ahead of spot lithium prices, suggesting potential growth by 2025 if the market anticipates tighter conditions.

Bernstein’s optimistic outlook points to a turning point for lithium, driven by robust demand growth and constrained supply in the coming years.