Lithium Market Poised for Recovery Amid Supply Cuts and Rising Demand

The lithium market, previously oversupplied, shows signs of recovery as supply reductions and lower inventories help stabilize prices. Bernstein analysts predict demand will surpass capacity growth by 2026, creating a favorable outlook for lithium prices despite upcoming capacity expansions in 2025.

Lithium prices, which peaked at $80,000 per tonne in 2022, have dropped over 85% to $10,000 per tonne—below marginal cash production costs. Bernstein notes that high-cost suppliers are curbing output, stabilizing prices in the near term. However, ample inventory and potential production restarts could limit significant price increases.

China’s lithium inventory has fallen from 130,000 tonnes in Q3 2024 to 100,000 tonnes, with inventory days dropping below 30. This decline signals a move toward equilibrium, though inventories remain above long-term averages. Bernstein forecasts spot lithium carbonate prices to average $12,000 per tonne in 2025, rising to $20,000 in 2026 and $25,000 in 2027, exceeding market consensus.

The firm highlights Sichuan Tianqi Lithium Industries (SZ:002466) as undervalued, with current valuations based on a long-term price of $12,000 per tonne, below Bernstein’s estimate of $15,000. Analysts suggest Tianqi’s share price historically reacts 6-12 months ahead of spot price movements, signaling potential gains through 2025 as the market anticipates tighter supply in 2026.

Bernstein’s projections indicate demand as a percentage of production capacity will climb from 77% in 2025 to 89% by 2027, tightening the market. These trends position lithium prices and related stocks for significant growth.