Unpredictable geopolitical situation to impact sector
Geopolitics is likely to play a key role in the lithium market this year, both directly and indirectly.
In 2024, the Biden administration raised tariffs on Chinese EVs to over 100 percent to counter alleged unfair trade practices, aiming to boost domestic production, but drawing criticism over potential supply chain disruptions.
Canada followed suit with similar 100 percent tariffs on Chinese EVs, as well as a 25 percent surcharge on Chinese steel and aluminum, citing the need to protect local industries. China has responded with World Trade Organization complaints against Canada and the US, along with the EU, labeling the measures protectionist.
Whether these tariffs against China will be enough to bolster the domestic North American EV market remains to be seen; however, the issue could become even more complicated if US President-elect Donald Trump makes good on his threats to levy tariffs on America's continental trade partners, Canada and Mexico.
Del Real doesn't expect US tariffs on critical minerals like lithium, but expressed concerns about a trade war.
“The bottom line is getting into a tit-for-tat with China is a dangerous proposition because of the leverage they have, especially in the commodity space, and so the tariffs are going to be passed down to consumers," he said. In his view, Trump's tariff threats could be more of a negotiating tactic than a sustained strategy.
More broadly, the experts INN heard from expect resource nationalism, near shoring and supply chain security to play prevalent roles in the lithium market and the critical minerals space as a whole.
“There's no doubt that lithium in particular has become politicized as policy makers across the globe have awoken from their slumber and realized that dependence on critical materials and supply chains in a single country is a bad idea for both economic and national security,” said Berry, noting that China had this realization decades ago.
“There is no easy fix, and you're looking at roughly a decade before any western countries have any sort of a regionalized or 'friend-shored' supply chain. Accelerating this would involve massive capital investment, patience and most importantly, political will. North America in particular has made great strides in recent years, but we have a long way to go. I'm not sure if fully decoupling from China is even a good idea," the battery metals expert added.
For Benchmark’s Megginson, 2025 could be a year of increased domestic development.
“We have seen several countries attempting to adopt some form of 'resource nationalism.' In some cases, this has been driven by wanting to onshore the production of critical minerals that are necessary for defense and nuclear applications. In others, it stems from a desire to be more self-sufficient so they can be more resilient to supply shocks.”
Proposed tariffs from Trump could also serve as a catalyst for US lithium output.
“With the incoming Trump administration, everyone has their eyes on how promises of increased tariffs will be implemented. Ultimately, heavier tariffs would accelerate efforts to onshore capacity in the US,” Megginson said.
“We may see the EU following suit with tariffs. There has been much said of the diversification of the lithium market away from China, but many of those efforts stalled in 2024 as the downswing in prices and a shifting geopolitical landscape made these endeavors more challenging," added the Benchmark senior analyst.
This nationalistic focus is also projected to impact refinement capacity and jurisdiction.
“While extracting the lithium from the ground has been successfully done in non-incumbent countries, such as in Brazil, Central Africa and Canada, with others expected to follow, the building of refining capacity has proved more difficult from a know-how and cost point of view, with a number of companies announcing that they are reining in some expansion plans, canceling some building projects or delaying decisions,” Adams of Fastmarkets said.
He went on to note that South Korea is an area to watch.
“Outside of China, South Korea has successfully ramped up new refining capacity, while Australia has had mixed results. The general issue is it’s hard to get the process right, and the CAPEX and OPEX outside of China means it is hard to be competitive. It will be interesting to see how Tesla’s (NASDAQ:TSLA) new Texas plant ramps up,” Adams noted.
Elsewhere, Adams pointed to the desire to secure supply chains. “Resource nationalism has also been an issue in some jurisdictions, with more countries now wanting processing capacity to be built in the country, and in order to force that they have banned the export of lithium-bearing ores. Zimbabwe a case in point,” he told INN.
Adams also pointed to Chile’s efforts to partially nationalize lithium producers, with the government mining company having controlling stakes in producers. “This could deter international investment in developing these mines,” he said. “In other metals, Indonesia has been very successful in playing the resource nationalism card.”