Rio Tinto’s US$10 billion plunge into the lithium pool through its takeover of Arcadium and a commitment to the development of its Rincon project in Argentina is one of reasons for investors to revisit lithium.
But so too is the latest surprise move by iron ore billionaire Gina Rinehart who has teamed up with Korea’s Posco group to build a new lithium processing plant, evidence that the smart money believes a lithium recovery is underway.
Layered on top of those investment moves is the prospect of a surge in merger and acquisition (M&A) activity of the sort tipped by Allens, a Melbourne-based law firm.
Falling borrowing costs and forecasts of an increased demand for commodities used in energy transition applications led Allens to predict a wave of deals across the lithium sector as big miners look to bulk up like Rio Tinto and small players merge to grow after a bleak winter of simply surviving.
Hard evidence of a lithium revival is yet to emerge with the price of the metal stuck at close to US$10,500 a tonne in its lithium carbonate form with a move up to US$11,000/t tipped for early in the New Year by Morgan Stanley, and then a rise to US$12,750/t in 2026.
“Bottoming out after passing the peak pain point” was the description of lithium by the bank though it also warned that future price rises could be capped by mothballed mines returning to production, a move already being considered by local leaders Pilbara Minerals and Mineral Securities.
The Morgan Stanley view is that lithium carbonate will continue to strengthen thanks to demand from electric vehicles (EVs) and fast-growing demand from energy storage systems (ESS) – the big batteries used to back up national power grids.
Lithium is not alone in having a promising look for next year though a call of the commodities card also reveals a number of walking wounded.
A snapshot of the metals closest to Australian investors looks like this:
Lithium. As mentioned above, could be the recovery story of ’25 with low prices forcing cost cuts and delays to project development plans. Energy transition, despite slow going with EV sales, has created a vibrant new market for lithium in the form of ESS (energy storage systems) which already account 12% of consumption with an annual growth rate of 30%.
Uranium. Like lithium, uranium is a winner from energy transition and a commodity which has also had a forgettable 2024 with a price fall of close to 30%. But that situation is changing as mine expansion and development plans persistently disappoint and concern grows about a Russian embargo on highly processed nuclear fuel. The price of uranium is forecast to return to US$90 a pound by mid-25, up 20% on latest sales at US$75.70/lb.
Silver. Poor man’s gold should shine next year thanks to multiple price drivers that include fast growing demand from energy transition where it is used extensively in solar panels with the price also benefiting from a growing deficit of freshly mined material. Silver will play catch-up with gold which has outperformed over the last two years thanks to heavy central bank buying which has not spread to silver where private investors have been leading the way. A rise in the silver price from its current US$30 an ounce to around UD$36/oz is expected by the middle of ’25.
Copper. A fading star for much of the past 12-months copper is expected to move back towards U$10,000 a tonne by the middle of next year thanks to a combination of improving demand and slower than forecast mine expansion. A wild card is whether the threatened China v U.S. trade war dampens global manufacturing.
Platinum. Supply cutbacks rather than a recovery in demand could see platinum return as a winner next year driven by forecasts of a 10% decline in newly mined production over the next three years. Problems in South Africa and Russia, the two major suppliers of platinum and its sister metal palladium, will help lift the price back over the US$1000/oz mark.
Gold. Has run hard for two years but is starting to look stretched. True believers see US$3000/oz as achievable next year but a price around where it is today would be more than enough to ensure the profitability of most producers and encourage an active exploration effort.
Zinc. The best performing base metal this year, zinc is expected to continue rising in the new year. Morgan Stanley believes zinc’s fundamentals have improved considerably thanks to solid demand and disappointing freshly mined output. The bank sees upside risk to the price which could reached US$3250/ t in the second half of ’25.
Iron Ore. Surprising resilience which has kept the iron ore price above US$100/t which is expected to be the price in the new year as both China and the U.S. encourage their manufacturing sectors.
Coal. To borrow Mark Twain’s famous quip “news of coal’s death has been greatly exaggerated”. Demand for heating (thermal) material remains strong, especially in Asia while metallurgical (steel making) coal is plugged into China’s demand for steel which should see a steady price around US$210/t over ’25.
Nickel. The sick man of Australian mining in ’24 is not expected to stage a miracle recovery in ’25 as a global surplus weighs on the price. Most investment banks see the nickel price struggling to move far above US$16,000/t thanks to the twin negatives of oversupply and lukewarm demand.
Rare Earths. A possible wild card in the commodities pack but also one weighed down by the China factor and the ability of that country to manipulate the price to discourage rivals. Plans for expanded Australian production using funds from Europe and the U.S. are slowly evolving but will face a blitz of price-destroying Chinese supply if/when they start.
