Investment in new lithium supply is threatening to tip the global market for the battery metal into a deficit, beginning as early as this year. The warning comes from Canaccord, which noted that the supply of lithium has tightened considerably, even as demand for electric vehicles has weakened. What’s more, the deficit may last for quite a while, until 2035.
Lithium is a rather abundant element, but deposits are concentrated in a handful of locations, commonly referred to as the Lithium Triangle locked between Argentina, Bolivia, and Chile. There are lithium deposits in other parts of the world as well, notably in the United States, but the triangle features the most abundant ones.
Because of this abundance, analysts for years predicted a comfortable supply, which, however, needed fresh investment in more production. This investment, those analysts said, was going to be motivated by the wider and faster adoption of electric vehicles and battery storage devices. Often referred to as the EV revolution, this wider and faster adoption only materialized in China and to a lesser extent in Europe, and it failed to lead to a surge in lithium investment.
This failure had a lot to do with lithium prices over the last couple of years. Despite all the predictions of surging demand, prices appeared to reflect a well-supplied market, going on oversupplied. Lithium prices crashed by 80% in the 12 months to mid-2025, further sapping appetite for investment in new supply. Lithium miners saw profits and margins shrink and projects curtailed or deferred until market conditions improve. Australian miners halted production at several projects. In China, CATL also suspended lithium production at one of the biggest deposits in the country last year to tackle overcapacity.
Lithium prices had hit an all-time high in 2022 before shedding as much as 90% as the combination of subsidies and pending EV mandates across some key markets, such as Europe, failed to spur mass adoption of electric vehicles. This forced lithium miners to revise their expansion plans and cut spending. It now appears that they are in no rush to reverse these plans.
Meanwhile, earlier this year Zimbabwe issued a ban on raw lithium exports in a bid to build local refining and boost its revenues from its natural resource. The African country is the largest producer of lithium on the continent, having some of the largest proven reserves of the battery metal in the world. The ban took the industry by surprise, prompting a last-second bust in mining activity. Yet it failed to lead to consistent expansion in production globally despite its disruptive potential and implications for supply.
Last year, lithium miners began warning that demand for the metal they produce may be underestimated, with tight supply on the horizon. Yet these warnings did not lead to a boost in investment in new supply, not least because of developments such as the Trump administration’s phaseout of EV subsidies that had a substantial impact on demand in one of the largest car markets in the world. Yet even in China, EV adoption has been slowing down. In fact, this year, EV sales are down in the world’s largest EV market. In February, China saw a sizable 32% decline in new electric car and hybrid registrations. The decline followed the phaseout of a tax incentive at the end of last year and the cancellation of funding for so-called trade-ins.
Since then, the oil shock caused by the U.S. and Israel’s war with Iran has prompted a surge in Chinese EV exports, which soared by 140% last month. Maintaining this momentum, however, would be challenging over the longer term. It seems that mining investors need more reassurance about the demand prospects of lithium before they risk their money.
By Irina Slav for Oilprice.com
