The lithium oversupply is reshaping the battery industry through price dynamics, production strategies, and market competition:
1. Battery Cost Reductions
Oversupply has driven lithium prices to multi-year lows (below $10k/tonne in 2025), directly lowering raw material costs for battery manufacturers. Benchmark Mineral Intelligence notes a 73% drop in cell prices since 2014 due to cheaper inputs and technological improvements. Cheaper batteries reduce EV production costs, accelerating price wars among automakers.
2. Supply Chain Restructuring
Producers, especially in China, prioritize market share over profitability, maintaining output despite low prices to secure long-term supply chain dominance. Battery makers are vertically integrating by investing in mining operations to stabilize costs and supply.
3. Demand-Side Pressures
Slower-than-expected EV adoption in key markets (e.g., China, the U.S.) weakens lithium demand growth, complicating production forecasts. However, energy storage systems (ESS) are emerging as a growth driver, with demand projected to rise 37% annually in 2025.
4. Market Balance Outlook
While oversupply persists through 2028, forecasts suggest tightening by 2026 due to production cuts and demand growth:
- 2025: ~10,000-tonne surplus
- 2026: Shift to a 1,500-tonne deficit
This could stabilize prices but risks underinvestment in new mining projects, potentially leading to supply crunches later.
5. Policy Risks
Proposed tariffs (e.g., U.S.-Canada lithium imports) threaten cost increases for North American manufacturers, as domestic production covers <50% of U.S. demand. Such policies could disrupt regional supply chains despite global oversupply.
In summary, the oversupply drives short-term cost benefits but introduces volatility, with battery makers balancing cheaper inputs against unpredictable demand and geopolitical risks.
Original article by NenPower, If reposted, please credit the source: https://nenpower.com/blog/how-does-lithium-oversupply-impact-the-overall-battery-industry/
