Lithium in 2025: Have the hopes of a recovery been another false dawn? It looks that way

The market for Lithium in 2025 has been a case of same old, same old. There has arguably been the best cause for hope in the current bear market, as judged by a 4 month rally in prices from US$575/t to US$985/t from June to October. But the fade out shows investors are losing hope. Were investors wrong to have optimism in the first place, and could 2026 be a better year?

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Lithium in 2025: Seemingly a false dawn

After a strong 2022; 2023 and 2024 were poor years for lithium due to market oversupply. For the first half of 2025, it seemed more of the same. But in the middle of the year, there were positive signs.

One came from China in the form of CATL’s suspension of its Jianxiawo lithium mine due to legal issues (specifically the expiration of its permits). As one of the world’s largest mines, this incident was viewed as a signal of supply constraint, and this sparked speculative upside in the market.

To be fair, this happens quite often with commodities, when any of the world’s largest mines are disrupted for any reason. Look at iron ore, a few years ago (in 2021), when one of the world’s largest mines suffered weather damage.

The rise of EVs kept going on and on. There was always a strong structural bull case for lithium, but the rise of BYD raised investor attention once more. We’d encourage investors to consider the natural effect of supply disruptions. A rally in price following these disruptions can feed into expectations of more curtailments, which itself becomes a self‑fulfilling prophesy.

Once prices begin rising, momentum flows (especially in thin markets) can carry them further (i.e. FOMO, bidding up forward contracts, speculative futures or auctions). Dislocations between certain sub-markets (i.e. spodumene and hydroxide) can exacerbate volatility.

Also in China, major player Gotion was expanding aggressively, and this move helped feed the market narrative.

There were good signs at individual company levels too

The U.S. government’s recent move (under Trump) to take a 5 % equity stake in Lithium Americas and its JV at Thacker Pass (Nevada) (plus potentially up to 10 %) has generated attention and has fed into narrative tailwinds for “securing domestic lithium. After all, Thacker Pass is one of the largest lithium deposits in the USA.

In Australia, a number of lithium companies raised capital including:

• Liontown (ASX:LTR), which raised >$300m
• Core Lithium (ASX:CXO,) which raised $50m
• WA1 Resources (ASX:WA1) which raised $100m.

Some companies were either able to cut costs at existing operations, or unveil ‘restart plans’ with lower costs than earlier iterations.

2025 seems to have been a false dawn

Now, prices are still ahead of where they were at the start of the year (they were US$575/t for those who have forgotten), but many of the signs that gave hope of a market recovery either came to nothing or reversed.

The Jianxiawo mine restarted, and it restarted earlier than expected, easing fears of prolonged tightness. Also, Gotion got a regulatory approval to avoid a shut down. Once markets saw that supply might not be as constrained as feared, some of the speculative premium unwound.

So many investors would have profit-taken, reversed their calls or betted on price corrections such as through futures or contract rebalancing. Many investors would’ve profited from shorting lithium stocks, especially Pilbara Minerals (ASX:PLS) that has persistently been one of the most shorted stocks in the market.

Indeed, on the first calendar day of October 2025, Pilbara fell 6.4%, Liontown fell 10.7%, Min Res by 3.8% and IGO by 4.1%.

Conclusion

Investors who thought 2025 would be the year lithium prices would get out of the toilet had hope for a few months, but will seemingly be disappointed. Yes some lithium miners have altered their business plans to have lowered their costs and were able to raise capital…but it was all based off hope that the disruption of CATL would lead to a constraint in supply. There was a disruption alright, but for less than 2 months, not enough to make a major impact on lithium supply.