Battery Metal Prices Decline Sharply Due to Oversupply Despite Strong EV Demand

Battery Metal Prices Decline as Supply Outpaces Demand
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Battery metal markets are currently facing significant challenges, with prices declining and oversupply putting pressure on producers. According to the latest analysis from Fastmarkets, a cross-commodity price reporting agency, there are few signs of a near-term recovery.

Despite the ongoing increase in electric vehicle (EV) sales, the market fundamentals for lithium, cobalt, nickel, manganese, graphite, and recycled materials are deteriorating. This trend is attributed to excess supply, sluggish investment, and rising policy uncertainty.

Lithium prices have experienced the most pronounced drop. In May, spodumene spot prices in China plummeted by 19.1%, reaching $612.50 per tonne, which marks a 30% decrease since January. Additionally, lithium carbonate prices fell by 10.3% from April to RMB 59,650 per tonne, representing a 20.3% decline since the beginning of the year. Although previous reductions in spodumene production had temporarily stabilized the market, weak salt prices in China have continued to compress processor margins, leading sellers to further discount their products. Analysts caution that prices have not yet fallen to a level that would trigger another round of output cuts.

Major producers such as Australia’s Albemarle (NYSE: ALB), Chile’s SQM (NYSE: SQM), and China’s Ganfeng Lithium (SHE: 002460) have already felt the repercussions of this market shift. Shares of Albemarle, the world’s leading lithium producer, have declined by 25% this year. SQM, the second-largest miner of lithium, has seen a drop of 5.6%, while Ganfeng’s shares are down by 6.4%.

William Adams, head of Base Metals Research at Fastmarkets, commented, “EV sales remain healthy, so the weakness in lithium prices is about oversupply.” He also noted that falling demand for battery energy storage systems in China, which declined by 1.5% year-over-year in the first quarter, could further dampen market sentiment.

Cobalt is similarly burdened by excess inventory and policy uncertainty. Despite speculation regarding potential changes to cobalt hydroxide export regulations in the Democratic Republic of Congo (DRC), no formal announcements were made during industry meetings in Singapore. Prices for all cobalt products weakened in May, even as China’s trade data revealed robust activity: imports of cobalt metal surged by 60% month-over-month in April, while exports increased by 202% year-over-year. The surplus has led to depressed seaborne prices, with refiners holding large stockpiles.

Rob Searle, a senior analyst at Fastmarkets, warned that the lack of clarity regarding DRC policy is exacerbating supply anxieties. “Chinese refiners face the prospect of a 60,000-tonne cobalt unit shortfall heading into Q3,” he stated. While prices remain soft, there is potential for a bullish turnaround if inventories begin to decrease significantly.

Uncertainty regarding supply from the DRC, the world’s leading cobalt producer, has impacted key players in the market. CMOC (OTCMKTS: CMCLF), formerly known as China Molybdenum, has seen its stock rise by 43% year-to-date, while Glencore has experienced a decline of approximately 19%. Cobalt producers, traders, and recyclers hold optimistic views for the metal, with a recent report from The Cobalt Institute forecasting that demand will outpace supply over the next decade, potentially leading to a deficit by the early 2030s.

Nickel continues to grapple with oversupply, particularly from Indonesia and China. The LME cash price fell by an additional 1.6% in May, reaching $15,105 per tonne. Although demand has remained stable, the market remains saturated. Analysts predict another surplus for 2025, asserting that only stricter supply discipline can reverse the current trend.

“There’s no near-term bullish narrative for nickel,” remarked Olivier Masson, principal analyst at Fastmarkets.

Manganese briefly improved, with spot prices for manganese sulfate in China rising in late May due to restocking. However, the overall sentiment remains weak. Operating rates among Chinese producers declined slightly in April, and the long-term demand outlook is uncertain due to low profitability for high-manganese chemistries. An upcoming export ban in 2029 by Gabon, a significant supplier to China, adds further complexity to the market.

Graphite continues to experience persistent price weakness and increasing policy risk. While natural graphite is exempt from US tariffs, synthetic graphite faces a steep 55% import duty. This situation, combined with uncertainties surrounding the US “One Big Beautiful Bill,” has cast a shadow over the sector. Users of synthetic graphite in the US face significantly higher costs, while high inventories and sluggish demand continue to suppress prices.

Investment and diversification in the graphite supply chain are being hindered by uncertainty on multiple fronts, according to Amy Bennett, principal analyst at Fastmarkets.

Battery recycling, particularly through hydrometallurgical processes, is also under pressure. Falling lithium prices have driven black mass refiners closer to breakeven, as the complex separation and purification processes struggle to remain profitable. Some recyclers are choosing to sell low-grade manganese content at a loss rather than upgrading it to electrochemical quality. Strong demand for feedstock, particularly from Asian refiners aiming to maintain high utilization rates, has resulted in a competitive market for limited scrap supplies. “The market is squeezed between weak metal prices and tight feedstock,” said Luke Sweeney, senior recycling analyst.

Energy storage systems (ESS) present a bright spot for innovation but are facing increasing headwinds. Lithium iron phosphate (LFP) technology continues to dominate, while sodium-ion and LMFP batteries are gaining traction. However, policy risks loom large. Proposed rollbacks of clean energy incentives in the United States, as part of the “One Big Beautiful Bill,” threaten to undermine investment and deployment momentum, according to Fastmarkets. Additionally, new safety standards in China and the US are raising the bar for ESS system design and performance.

While EV sales in China remain robust—up 30% year-over-year in May—and BYD’s international expansion is gaining momentum, analysts caution that these demand drivers may not be sufficient to balance the structural oversupply present in the battery metal markets.

Fastmarkets predicts that the resilience of producers, traders, and policymakers will be tested in the coming months as they navigate an increasingly volatile landscape.