Lithium bear market tipped to intensify in 2025 Alex GluyasMarkets reporter
Updated Dec 4, 2024 – 4.02pm,first published at 1.53pm
Higher-cost lithium producers are not shutting down operations fast enough even as fresh supply floods the market, keeping the battery mineral in surplus until 2027, Bank of America warns.
Its commodities team has slashed next year’s spodumene forecast by 25 per cent to $US750 a tonne, and more than halved its 2026 projection to $US800. Prices currently trade around $US810 a tonne.
The broker said lithium producers had been cutting output in response to the collapse in prices, which was starting to make a dent in the surpluses it had forecast for 2025 and 2026. But it warned that other producers were still increasing production.
“This is partially driven by strategy and geopolitics: producers do not want to curtail activity in a market that is growing exponentially,” said Bank of America’s head of metals research Michael Widmer.
“We therefore expect another surplus in 2025, but we stand ready to call an end to the bear market should production discipline finally come through.”
The bank flagged that most production increases were from hard rock mines, with spodumene output, in particular, pushing higher. That would lift the physical market into a surplus of 153,802 tonnes next year before dropping to 27,741 tonnes in 2026 and then tipping into a deficit in 2027. Penetration rates for EVs
It estimated that the penetration rates for electric vehicles would need to be 10 percentage points higher from current levels to clear the surplus in the physical market. It recently downgraded that rate – which measures the number of customers in a target market – by 2 percentage points as EV demand waned outside China.
“If economic rationale ultimately prevailed and marginal [lithium] producers were to shut sites, as we saw in the 2015 to 2021 cycle, it could take more than two years for the market to rebalance,” Mr Widmer said.
“But we are not optimistic that this timeline will be met and see limited upside potential to prices for now.”
UBS is slightly more bullish and this week called the bottom of the rout in lithium prices. The broker increased its spodumene forecasts for 2025 to $US800 a tonne and for 2026 to $US850 a tonne.
Although it said lithium stocks were no longer expensive, it still rates Liontown Resources, Pilbara Minerals and Mineral Resources a “sell”, but has upgraded IGO to “neutral”.
Bank of America is far more bullish on uranium, which it expects to surge more than 50 per cent from current levels to $US120 a pound next year and to rise to $US135 a pound in 2026 and $US140 a pound in 2027.
The bank maintained its projections for the next two years, and raised its forecasts for 2027 to 2029 because of potential delays to greenfield mines and growing demand for nuclear power in the back half of this decade.
Russia’s recent ban on enriched uranium exports to the US is also expected to reduce the volumes available and tighten the physical market. Despite the outlook, Paladin Energy and fellow uranium operators Boss Energy and Deep Yellow are among the top seven most shorted stocks on the ASX.
As for iron ore, Bank of America said prices would lose steam in 2025 as weak steel demand in China and rising global supply pushed the physical market into a 190 million tonne surplus next year.
The bank expects prices to fall to $US90 a tonne in 2025, but noted the risk of them dropping to $US75 a tonne over the next 12 months if higher-cost miners failed to cut production. That represents a 29 per cent plunge from current levels.
