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Lithium Oversupply and Lithium as a Strategic Resource

Last week, we got a glimpse of how critical minerals became a central topic in the geopolitical arena. Now, we take a closer look at how lithium may be at the center of political interests.

What is really happening in the lithium market, and how can geopolitics impact the future of the battery industry? Let’s take a closer look at the situation.

From Growth to a Sudden Lithium Surplus

As we know, lithium is a critical raw material for the technological transition to electric vehicles and energy storage. Demand for lithium has grown exponentially since 2016, driven by the global push for electrification. Automakers and energy companies have lined up to secure supplies of lithium. Between 2022 and 2024, global lithium production increased dramatically, from approximately 737,000 tons in 2022 to 1.2 million tons in 2024, measured in lithium carbonate equivalent (LCE). A significant part of this growth was driven by large-scale lithium extraction and the rising demand for electric vehicles.

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But then came a turning point. Prices plummeted in 2024 due to an unexpected oversupply in the market. Demand for electric vehicles did not grow as much as expected, and manufacturers began reducing their orders. Overcapacity led to production cuts in Australia early in 2024, and China followed suit. Several Chinese mines were shut down, including one of the country’s largest lepidolite mines, which was put on hold due to high production costs (Fastmarkets). 

The major players want to secure their own supply

Despite the lithium surplus in 2024, we have seen an increasing trend among nations and automakers to secure their own lithium resources. Volkswagen announced in January 2025 an investment in a partnership with the Canadian lithium producer Patriot Battery Metals to strengthen its control over battery supply. Tesla has long been seeking more control over its lithium supply, and rumors about the company considering its own mines have been circulating for some time. Although it has not started mining operations, the company has invested in its own refining capacity and recently in 2023 opened a lithium refinery in Texas to reduce its reliance on external suppliers. 
But this issue extends beyond just the automotive industry, and there is now talk about lithium as a resource of national security importance. Several analyses have pointed out that a country lacking access to lithium could face challenges with energy storage, electrification, and military technologies (CNN). 

China Tightens Control

Concerns about securing lithium are not unfounded. In early January 2025, China proposed new export restrictions on lithium technology and battery materials. According to China’s Ministry of Commerce, the reasoning behind these measures is the need to protect domestic industry and maintain technological advantages. The proposal includes restrictions on the export of technology related to the production of battery-grade lithium iron phosphate (LFP), lithium manganese iron phosphate (LMFP), and other advanced cathode materials. China’s proposed restrictions on battery technology exports could impact the battery supply chain, particularly in the U.S. and Europe, where many producers rely on Chinese technology and the Chinese market.

Lithium supply remains uncertain, both at the production level and in politics. With trade conflicts looming and more countries striving to secure their own resources, lithium appears to be playing a role in both politics and economic strategies. How the market adapts to these shifts could influence both prices and lithium availability in the years to come.





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