Lithium market braces for uncertainty as Trump’s policy reversals loom

The global lithium sector, a cornerstone of the electric vehicle (EV) revolution, faces an uncertain future following a prolonged price rout and potential policy reversals under Donald Trump's return to the US presidency. 

While analysts suggest the market has found a near-term floor, challenges persist for the critical battery metal.

Home to significant reserves of lithium, copper, cobalt, and nickel, Australia plays a pivotal role in the lithium-ion battery supply chain. 

However, the sector endured a challenging 2024, with lithium prices dropping by nearly 25% year-on-year. 

This downturn forced local producers such as Mineral Resources to shutter operations, while explorers like Charger Metals and Delta Lithium saw steep declines in market value — losing up to 65% of their market value.

“Nobody’s feeling comfortable at today’s price, it’s a massive headwind,” said Ken Brinsden, CEO of Patriot Battery Metals. 

Echoing these sentiments is Morgan Stanley (NYSE:MS), which anticipates that price recoveries may be short-lived due to oversupply risks.

Trump to compound industry woes

Compounding the industry’s woes is Trump’s expected rollback of EV purchase incentives, which could slow US demand for lithium, potentially reducing the country’s battery market growth by up to 20%. 

This contrasts with the rapid expansion under Joe Biden’s Inflation Reduction Act, which injected billions into EV adoption and battery manufacturing.

Long-term optimism remains

Despite these headwinds, Australian stakeholders could find opportunities in refining and processing critical minerals if the US retracts green energy investments. Climate Change Authority chair Matt Kean said, “If other countries vacate the field, then let’s take the rug from under them.”

Global miner Rio Tinto remains bullish, advancing its Rincon project in Argentina despite the downturn. “Actually, the lower the price goes... [it] is only good,” said CEO Jakob Stausholm.

Patriot Battery Metals’ Brinsden also remains optimistic over the longer term, noting lithium’s historically brief cycles. “Investors are watching closely and are ready to pounce,” he said, anticipating a lithium resurgence.