Lithium is enjoying a mini-revival on an uptick in Chinese electric vehicle demand and supply cuts, although analysts caution there’s still likely to be a surplus of the battery metal in 2025.

Chinese lithium carbonate spot prices have rallied around 8% since late October and are now at a three-month high, while futures on the Guangzhou exchange have jumped 13% so far this week.

An expansion in Chinese subsidies encouraging people to trade in older cars has aided the nascent rebound in the metal that’s crucial to the energy transition. EV manufacturers there are on track to hit ambitious annual sales targets, and there is also speculation that Donald Trump’s election win may be encouraging Chinese battery makers to snap up lithium ahead of a likely trade war.

“Demand for lithium carbonate in November has been stronger than market expectations for a typically slow year-end season,” said Zhang Weixin, an analyst at China Futures Co. The Chinese subsidies have been a positive stimulus and battery makers may be rushing to export before the imposition of trade barriers, he said.

On the supply side, a drawn-out slump in the lithium market this year — prices remain mired at levels that are less than a fifth of the peak in late 2022 - has led to mines closing or cutting costs in Australia, China and elsewhere.

There’s been 190 000 t of lithium mine capacity curtailments since late 2023, and another 50,000 tons of delayed projects, according to CRU Group. As a result, the consultancy has cut its supply forecast by 14% for next year, said Cameron Hughes, a battery markets analyst.

The market has “significantly tightened,” but CRU still sees a surplus next year, given the weakening demand growth, he said. “There is still room for further curtailments.”

Despite the uptick in China, the short-term global EV demand outlook remains gloomy as automakers delay new roll-outs, and rising protectionism is likely to weigh on consumption over the longer term.

There’s a risk the recent uptick could trigger some supply coming back, according to China Futures’ Zhang. “The market surplus situation hasn’t fundamentally shifted yet.”