SANTIAGO - Production cutbacks by lithium companies in response to low prices for the metal have tightened supply forecasts, but a global surplus is still expected for 2024 and 2025, Chilean copper commission Cochilco said on Thursday.

The global market was expected to post a surplus of 89,000 tons of lithium in 2024 and 141 000 t in 2025, according to a report from Cochilco, Chile's government agency for mining studies.

Chile is the world's second-biggest producer of lithium, a key component for electric vehicle batteries. US-based Albemarle and Chile's SQM are the only companies extracting lithium in the South American nation.

"The strong lithium supply would place the market balance in 2024 and 2025 in surplus," the report said, adding that supply and demand are expected to be more balanced as soon as 2027.

"With lithium prices down as much as 78% over the year, there has been a supply response with cutbacks and a slowdown in both greenfield and brownfield projects, which has brought forward forecasts of a market rebalancing towards 2027-28," the report said.

It noted that lithium prices in the September-November period were so low that they may have reached a floor.

Cochilco said the country was expected to have produced about 285 000 metric tons of lithium carbonate equivalent (LCE) in 2024, a figure set to increase to 305 000 t in 2025.

The report noted that other nations are expected to become more significant global lithium players.

Zimbabwe was expected to have produced 75 000 t in 2024, about 6% of the global supply, while Mali's Goulamina and Congo's Manono mines were forecast "to substantially increase production in the next few years."

Argentina was forecast to produce more than 100 000 t of lithium in 2026 as large projects come online, and attract investment due to incentives under libertarian President Javier Milei.

Cochilco also flagged risks tied to the election of US President Donald Trump, who was sworn in on Monday, and has threatened to impose broad import tariffs.

"The results of the US elections are a major source of uncertainty for commodities ... due to concerns that the tariffs proposed by the new (US) President will reduce global growth," Cochilco said.

"The heavy dependence on lithium consumption in China, a country that is involved in trade disputes with the United States and the European Union, which could worsen, has generated additional negative pressure on its price."