Citi: When will lithium prices stabilize after their sharp drop? Citi expects destocking to pressure prices through 2027

How has Citi revised its outlook after the fall in lithium prices?

Lithium spot prices have fallen 40% since September 2026, while the most actively traded lithium carbonate contract on the Guangzhou Futures Exchange fell about 25% after the National Day holiday, dropping below 90 thousand yuan per tonne. Citi believes the market’s focus has shifted from the recently tight supply-demand balance to the outlook for 2027.
Citi previously expected lithium prices to trade between 18 thousand and 20 thousand dollars per tonne; it now expects pressure to persist over the coming months, with prices potentially testing 10 thousand to 12 thousand dollars per tonne in the near term. The bank cut its point-in-time price targets for both lithium carbonate and lithium hydroxide over the next 0 to 3 months to 12 thousand dollars per tonne, from 20 thousand and 17 thousand dollars respectively; it cut its target for SC6 spodumene concentrate from 2000 to 1200 dollars per tonne.

Citi expects battery demand to grow 25% year on year in 2027, a marked slowdown from the strong growth of about 50% in 2025 and 2026. End demand, particularly for electric vehicles, has failed to keep pace with growth in battery cell and cathode material output.
Proposed Chinese and European restrictions on exports of Chinese plug-in hybrid and hybrid vehicles, together with reduced export tax rebates for electric vehicles, have heightened concerns about demand in 2027. Citi roughly estimates the direct impact of the export restrictions on global lithium demand at about 10 thousand tonnes of lithium carbonate equivalent, but broader macroeconomic pressures and uncertainty over battery demand have affected sentiment.
With prices expected to keep falling and supply to improve next year, downstream buyers tend to delay purchases and draw down inventories. Reduced purchasing could further depress prices, creating a cycle in which destocking and weaker prices reinforce each other.

The shortage in 2026 stemmed from strong battery demand and constrained supply, with Zimbabwean policy changes and a delayed restart at the Jianxiawo mine following an environmental review widening the gap. Citi expects the market to move into surplus from 2027 to 2029, as supply grows faster than demand.
On a risk-adjusted basis, Citi expects lithium supply to increase by about 493 thousand tonnes of lithium carbonate equivalent in 2027, with China contributing about 206 thousand tonnes and Australia about 102 thousand tonnes. Jianxiawo is expected to restart within weeks and gradually ramp up in 2027; however, prolonged low prices could affect the ramp-up at the mine and other lepidolite mines.
The bank’s supply-demand model already incorporates supply disruptions of about 130 thousand tonnes of lithium carbonate equivalent, or 5%, covering policy or weather risks such as Zimbabwe’s ban on concentrate exports, lepidolite permit reviews and a potential super El Niño.

Visible inventories remain low in the near term, with Chinese inventories continuing to fall under both historical and revised data definitions; some exchange inventories may not meet battery-grade specifications, leaving immediately available battery-grade stocks potentially even tighter. A seasonal strengthening in battery production over the coming months could also support lithium prices.
However, Citi believes producer hedging and expected supply growth in 2027 will limit the scope for a rebound. The bank believes that if prices fall to 10 thousand to 12 thousand dollars per tonne, rebalancing the market may require production cuts by high-cost producers or renewed restocking across the battery supply chain; lithium prices could then recover at the end of 2027.