Is lithium rebounding for real this time? 4 signs it is and 4 signs you should still be skeptical

Is lithium rebounding? And is it for real this time – above levels that many of the top players like Liontown (ASX:LTR) did their feasibility studies at and assumed their projects would be profitable?

Prices were at 4-year lows of US$610/t in June, but prices have been recovering. CIF China prices for 6% concentrate were $945-955/mt, while others reported $778-858/mt. Still a long way below the A$6,000/mt price recorded in 2022, but positive signs. Is this the start of something bigger?

In our view, it is too early to tell, but let’s speculate. Here are 4 signs it could be happening and 4 signs it is not.

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Is lithium rebounding? 4 signs it is

1. There’s a supply rationalisation

There’s been a wave of production curtailments: Australian mines like Bald Hill, Ngungaju, and others have halted operations; high-cost Chinese operations and Zimbabwe projects are scaling back.

A mine shutdown in China (due to an expired license) removed ~3–8% of global lithium supply, sparking a sharp rally. Lithium carbonate futures climbed 1.8% to 8%,000 yuan/ton, and lithium stocks jumped by double digits in some cases. There have also been reports that China has cracked down on dodgy mining permits generally, specifically to address oversupply.

2. There are some realistic signs demand fundamentals are strong

EV demand, while slowing from earlier highs, continues to grow—particularly in China—and energy storage demand remains robust, with projected growth in lithium demand of ~26% in 2025 (to 1.46 million tonnes of LCE).

We think it is the growth in popularity of BYD electric vehicles that has awoken investor attention to the promise of EVs again. Additional sources of demand—like grid-scale storage, robotics, and consumer electronics—contribute to a diversified, resilient demand outlook.

3. Companies are positioning themselves for a recovery

Core Lithium, that mothballed its project less than a year after it entered production, unveiled a plan for a mine re-start that would see greatly improved margins as well as an increased Resource – 48.5Mt @ 1.26% lithium.

And CXO is not alone, Major players like Rio Tinto, Albemarle, SQM, and Ganfeng are adapting through M&A, strategic investments, or operational efficiency improvements, aligning for cycle turnaround.

4. Some analysts and fund managers are optimistic.

Some have called the bottom of the market, and if it is ‘the bottom’ of the market, then that must mean prices can only go up, theoretically (if it is the bottom). CBA’s Vikvek Dhar is one to have made that call, which he did in early August off the back of events in China. Fund managers including Argonaut and Ten Cap have reportedly been taking on short-sellers, betting that hedge funds will need to cover their positions and the rally will be turbocharged.

4 signs it that lithium is not rebounding (legitimately)

1. We still don’t know if the China mine shut down and supply cuts is long-term

Analysts warn this could be a short-lived spike if the disruption is reversed or other supply remains strong. They expect prices to recover, they tend to expect a more sustainable recovery in 2026 rather than immediately. Commodity bottoms typically involve a multi-month base-building phase, sometimes with retests before a stronger uptrend emerges

2. There’s still lingering over-supply and a risk of re-acceleration in supply

Despite some rationalisation, forecasts still point to a modest lithium surplus in 2025 (tens of thousands of tonnes), with potential transition to a slight deficit only by 2026. China’s chemical inventories rose by ~35,000 t since January, indicating supply remains ample.

Moreover, if prices stabilise or recover, idled capacity (like Finniss could restart quickly and re-inject supply, capping the recovery. producers in regions like Zimbabwe, Nigeria, and China could re-enter the market if economics improve.

3. Gold appears more attractive for investors

As investors turned away from lithium, they put their money into gold stocks – miners, developers and explorers alike. And what will happen that will make them take their money out of the renowned ‘safe haven’? Presumably, only something that would make gold drop substantially (i.e. over 25%). But what would be that something? An overabundance in supply perhaps, but the market is a long way from that point.

4. Some bad signs from customers and JV partners

It hasn’t all been good news for ASX lithium stocks. Even companies with re-start plans have no firm plans of when to re-start, just when lithium prices are better. And there has been other bad news too. IGO fully impaired its stake in Kwinana, Liontown said US car maker Ford cut the material it would buy, and Pilbara emphasised its ongoing efforts to cut costs.

Our view

We think investors should watch for the price to go above US$1,000/mt. Then we may be willing to make a call that we are in the next lithium bull market.