Reported by Reuters, Shanghai After two years of sharp drops, lithium prices are predicted to level off in 2025 as China's strong electric car sales and closed mines absorb an excess supply, however the possibility of mine reopening could limit increases, according to analysts and dealers.

Companies were compelled to shut down mines all around the world as the price of the metal used in EV batteries fell by about 86% in the last two years from its peak in November 2022. However, as China steps up state support to increase sales in the largest EV market in the world, market participants say those closures indicate that strong demand should exceed supply this year.

Antaike, China's state-owned commodity data source, forecasts that the worldwide excess of lithium supplies would decrease by half, from about 150,000 tons of lithium carbonate (LCE) last year to about 80,000 tons.

Cameron Hughes, a battery markets analyst at CRU Group, stated, "We expect to see a price recovery for lithium in 2025 as the curtailments seen in 2024, and the possibility of further curtailments, will significantly reduce the market surplus," referring to mine closures without providing any information.

In July, China quadrupled its EV subsidies, and as of mid-December, the incentives had helped sell almost 5 million cars.

According to three analysts and two dealers, China's EV subsidies helped fuel a spike in lithium prices late last year and are expected to keep doing so in 2025.

A buyer at a mid-sized cathode material mill in China stated, under condition of anonymity because the buyer was not permitted to speak to the media, that "the policy of providing subsidies can be undeniably attributed to the uptick in lithium trade business in the fourth quarter of 2024."

As stockpiles are depleted and buyers return to the spot market, any price recovery is probably going to be realized by the end of 2025, according to David Merriman, research director at metals research firm Project Blue.

According to Project Blue, prices will level off in 2025 at about $11,092 per metric ton on average. The price range predicted by Chinese broker Guotai Juan is between 60,000 yuan ($8,184) to 90,000 yuan ($12,276).

Last year, the Guangzhou Futures Exchange's most-traded lithium contract fluctuated between 68,250 and 125,000 yuan a ton.

However, analysts warned that since production may be quickly increased at many closed mines if it turns out to be viable, any large price increase this year is probably going to be limited.

Lithium demand may also be at danger from possible U.S. policy changes under the upcoming Trump administration, Merriman added, such as new taxes on Chinese EV battery imports or a reduction in local EV subsidies.

($1 is equal to 7.3312 Chinese yuan).