As 2025 looms, buyers and sellers of lithium, the crucial material for electric vehicle (EV) batteries, are locked in tense annual supply negotiations. Lithium prices are set for a second consecutive annual decline, following a dramatic near-90% plunge from their 2022 peak, yet the worst of the downturn appears to be behind the market. With many refineries grappling with slim profit margins, producers are now aiming to secure better terms in talks with battery manufacturers and automakers.

The lithium market has faced significant challenges over the past year, driven by a global slowdown in EV adoption and a glut of supply. The industry, which had surged in the wake of the EV boom, is now dealing with a period of adjustment as growth in electric vehicle sales has slowed. China, the largest consumer of lithium, has shown signs of recovery, providing some stability, while other regions, including Europe and the US, have also seen moderate demand.

For the upcoming 2025 contracts, sources familiar with the negotiations revealed that the discounts lithium buyers are seeking have become significantly smaller compared to the previous year. This year’s deals are being negotiated with discounts of between zero and 2% off an index of spot prices. In comparison, some 2024 agreements had seen discounts ranging from 5% to 10%, marking a shift toward tighter margins in the market. This change signals a cautious optimism among producers, suggesting that the worst might be over, though the market remains far from its highs.

These discussions are critical for stakeholders across the battery supply chain, including manufacturers of cathodes, batteries, and EVs. South Korean, Japanese, and Chinese companies, in particular, rely on long-term contracts for the bulk of their lithium supply. These agreements are typically priced at a premium or discount relative to a third-party index of spot prices. However, the volatile nature of lithium pricing in recent years has prompted many players to move away from fixed-price contracts in favor of annual negotiations.

The price fluctuations of lithium have had far-reaching effects. This reduction in battery prices comes as a welcome relief for EV manufacturers, who face a challenging year ahead due to concerns about China’s economic slowdown, Europe’s sluggish transition to EVs, and the potential for changes in US policy on emissions and trade.

As 2025 supply talks continue, the focus is on balancing the interests of producers, who are seeking to stabilize their revenue streams, with the needs of buyers who are navigating a complex global market. While the current negotiations may lead to slightly tighter terms for customers, it reflects an industry in transition, one that is slowly regaining its footing after a turbulent year.