Battery metals markets have experienced a devastating downturn throughout 2023 and 2024, as plummeting prices for lithium, nickel, and cobalt force mine closures and project deferrals across the industry. This dramatic reversal in the sector’s fortunes reveals a complex interplay of oversupply, slower-than-expected electric vehicle adoption, and shifting market dynamics.
Despite reaching a new milestone of 1.8 million electric vehicles sold globally in November, with year-to-date growth of 25% compared to 2023, the EV market’s expansion has failed to meet ambitious projections. China continues to dominate global EV sales, while markets in the United States and Europe struggle to maintain momentum. European sales actually declined in November, while North American growth limped along at just 10% year-over-year.
Consumer behavior has proven more resistant to change than anticipated, particularly in Western markets where government incentives play a crucial role in driving adoption. Germany’s experience serves as a cautionary tale, with new-energy vehicle sales plummeting following the abrupt termination of subsidies in late 2023. The situation could worsen in the United States if Donald Trump follows through on campaign promises to roll back Biden administration EV policies.
Adding to the sector’s woes, many consumers, especially in the crucial Chinese market, are opting for hybrid vehicles rather than fully electric models. These hybrid vehicles require only about one-third of the battery capacity, significantly reducing demand for battery metals. The growing popularity of lithium-iron-phosphate (LFP) batteries, which dominated Chinese EV sales last year, has particularly impacted nickel, cobalt, and manganese markets.
Supply-side dynamics have exacerbated the crisis, with massive production increases coinciding with weakened demand. Indonesia’s nickel industry exemplifies this trend, with Chinese producers successfully processing the country’s lower-grade ore into high-purity metal, contributing to a projected 30% production growth this year. The situation became so dire that mining giant BHP shuttered its Nickel West operation in October, despite positioning it as a cornerstone of their green metals strategy.
The cobalt market faces similar challenges, with CMOC Group more than doubling its output to 84,700 tons in the first nine months of the year, seemingly undeterred by collapsing prices. Chinese lithium producers have also maintained high production levels, protected by vertical integration that allows them to offset mining losses against downstream processing gains.
Trade tensions between the United States and China add another layer of complexity to the market outlook. A recent U.S. Congressional report accused Chinese producers of deliberately driving down prices through dumping and overproduction, highlighting growing concerns about China’s dominance in the battery metals supply chain. Bipartisan support for reducing dependence on Chinese supplies could lead to increased tariffs and federal spending on domestic production capacity, potentially fragmenting the global market into separate pricing spheres.
Looking ahead to 2025, analysts expect continued pressure on producer prices, though lithium’s supply overhang may ease to less than 1% of demand. However, nickel and cobalt markets risk facing structural oversupply until production aligns more closely with actual demand. The sector’s recovery will largely depend on producers’ willingness to implement meaningful supply discipline, particularly in China, where economic and strategic interests often override market signals.
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