Lithium Buyers and Sellers Negotiate 2025 Supply Terms Amid Price Challenges
Negotiations for 2025 lithium supply agreements are underway, as producers seek better terms after another challenging year for the critical battery material. Lithium prices are on track for a second consecutive yearly decline, though the steep price rout that saw a near-90% slump from peak levels appears to have stabilized.
Lithium refineries are pushing back against discounts demanded by customers in the battery supply chain. Current discussions suggest deals are being negotiated at discounts of 0% to 2% off a spot price index, compared to discounts of 5% to 10% for some 2024 agreements. The shift indicates producers’ hopes for modest market improvements in 2025.
Lithium chemical supply contracts, primarily serving cathode, battery, and electric vehicle (EV) manufacturers, are being negotiated across Asia, the largest lithium-buying region. Long-term agreements dominate purchases by South Korean, Japanese, and Chinese buyers. Contracts are typically linked to third-party spot price indices, with premiums or discounts determined through negotiations.
The global lithium market faced significant challenges in the past year, driven by a slower pace of EV adoption that led to oversupply. However, recent stabilization in Chinese demand and accelerated battery sales to the U.S. ahead of Donald Trump’s upcoming presidency have provided some relief to prices this quarter.
The shift from fixed-price to annual supply contracts reflects the volatility of the EV era. Price swings in the lithium market have created cost challenges for battery manufacturers and automakers, prompting a move toward contracts similar to those in metals markets like copper.
The decline in lithium prices contributed to the largest annual drop in battery pack costs in seven years, according to Bloomberg New Energy Finance. While this benefits EV manufacturers, the industry faces broader pressures, including economic concerns in China, a slower EV transition in Europe, and potential policy shifts in the U.S. on emissions and trade.
