Buyers and sellers of lithium are locked in annual supply talks for 2025 as producers push for better terms after another challenging year for the key battery material.

Lithium prices are heading for a second yearly decline, although the worst of the rout seems to be over after a near-90% slump from their peak. In contract talks for next year, lithium refineries are trying to rein in discounts sought by customers in the battery supply-chain, according to people familiar with the matter.

Deals are being discussed at between zero and 2% off an index of spot prices, said the people, who asked not to be identified discussing confidential matters. That compares with discounts of about 5% to 10% for some 2024 deals in the last round of talks.

The tighter levels comes as producers continue to struggle with thin margins, and suggests the sector is hoping for a mild improvement in conditions over the coming 12 months. Deals will also be subject to negotiations over volumes, time periods and other variables.

The negotiations over supply of lithium chemicals — the output from refineries — are for customers including manufacturers of cathode, batteries or electric vehicles. Asia is by far the top lithium buyer, while long-term contracts account for the bulk of purchases made by most South Korean, Japanese and Chinese users.

The past year has been torrid for lithium, as a global slowdown in the pace of EV adoption left the market saddled with a glut. Still, a pick-up in the Chinese market — and some front-loading of battery sales to the US before Donald Trump reaches the White House — has helped prices to stabilize this quarter.

Until just a few years ago, long-term supply contracts were at fixed prices. That changed in the EV era, as massive price swings created cost headaches for battery firms and automakers, prompting a shift to annual agreements struck in a similar way to other metals like copper. Term deals are inked at premiums or discounts to an agreed third-party index of spot prices.

Lower metal prices were among factors driving the biggest annual drop in the average price of battery packs in seven years, according to Bloomberg New Energy Finance. That’s a boon for EV manufacturers who face a tough year ahead, amid concerns over China’s economy, Europe’s stalling transition to EVs, and potential changes to US policy on emissions and trade.