Citi has lowered its lithium price targets for the next two years, citing concerns over slowing battery demand growth, rising trade uncertainty, and broader macroeconomic headwinds.
Citi analysts, including Shreyas Madabushi, warned in a report that fears of worsening lithium demand next year have triggered a "lithium reset," and that lithium prices will remain depressed in the near term.
"As supply is expected to improve in 2027 and demand uncertainty rises further next year, consumers may delay purchases and keep inventories lean. In the short term, sentiment and positioning may continue to dominate, keeping risks skewed to the downside," Citi said in the report.
This means that after the sharp correction in the lithium market, whether prices can stabilize in the near term depends not only on changes in mine and refining capacity, but also on when battery makers, automakers, and energy storage companies restart restocking.
If downstream companies continue to adopt cautious purchasing strategies, inventories across the supply chain could remain at low levels, further weighing on spot market price performance.
Changes in auto industry policy, trade barriers, and subsidies for new energy vehicles could all directly or indirectly affect lithium demand.
Recently, plans to restrict exports of Chinese hybrid vehicles to the European Union and other factors have intensified market concerns about demand for automotive batteries and large-scale energy storage systems.
At the same time, slowing global macroeconomic growth could also prompt consumers to delay purchases of new energy vehicles and push automakers to adopt more conservative inventory strategies for battery procurement.
On the supply side, the market is gradually entering another critical phase.
After the lithium industry underwent large-scale capacity expansion, as some new mines, salt lake projects, and refining projects gradually ramp up output, supply growth may again outpace demand growth.
Goldman Sachs Group forecast last month that the lithium market will shift from a supply deficit to near balance this quarter, followed by oversupply over the next two years.
If that judgment proves correct, the lithium market may shift from the logic of supply tightness driving prices higher in recent years to a pattern in which "supply growth plus slowing demand" jointly suppress prices.
For producers, this means the importance of the cost curve will rise further, and high-cost mines and marginal projects may face greater profitability pressure.
For downstream battery companies and new energy vehicle manufacturers, however, falling lithium prices are expected to lower battery raw material costs and improve profit margins to some extent.
Price performance has already reflected a clear weakening in market sentiment.
The most actively traded lithium carbonate contract on the Guangzhou Futures Exchange rose 1.2% in morning trading to 91,160 yuan ($13,710) per ton.
However, the contract has fallen more than 40% since the end of August.
Lithium prices have dropped more than 40% since the end of August.
Citi cut its three-month price targets for lithium carbonate and lithium hydroxide to $12,000 per ton from $20,000 and $17,000, respectively, while lowering its spodumene price forecast to $1,200 per ton from $2,000.
The bank also downgraded its forecasts for these three battery raw materials through the end of 2028.
Citi's broad downgrade of its forecasts shows that the bank believes pressure in the lithium market may not be a short-term fluctuation, but part of a realignment of supply and demand.
Especially with continued supply-side expansion, even if the new energy vehicle and energy storage industries keep growing, lithium prices may remain under pressure for a longer period as long as demand growth is insufficient to absorb new supply.
Still, a sustained decline in lithium prices could also bring new rebalancing mechanisms to the market.
When prices fall to levels at which some high-cost producers struggle to remain profitable, mine output cuts, project delays, or capital expenditure reductions may gradually emerge, thereby restraining future supply growth.
If new energy vehicle sales continue to grow, or energy storage demand exceeds expectations, the supply-demand relationship could tighten again and drive lithium prices to bottom out and rebound.
Therefore, the core variables for the future lithium market will be concentrated in two directions: on one hand, actual demand from China and global new energy vehicle sales, hybrid vehicles, and large-scale energy storage projects; on the other hand, the pace at which new lithium mines, salt lake projects, and refining capacity are released globally.
At the same time, trade policy, inventory cycles, and producers' responses to the low-price environment will also determine the duration and magnitude of the lithium price adjustment.
In the current market environment, lithium prices may still face considerable downward pressure in the short term, but if prices remain below producers' cost tolerance for a sustained period, proactive supply-side adjustments may ultimately become an important force for market rebalancing.
For investors, the key focus going forward is not only lithium prices themselves, but also global new energy vehicle sales, energy storage installations, supply chain inventories, and production adjustments by major lithium producers.
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