The third lithium super-cycle! UBS: Comprehensive upgrade of lithium price forecasts, demand expected to double by 2030

UBS announced a substantial upward revision of its lithium price forecasts, with a maximum increase of 74%, and expects global lithium demand to double from 2025 to 3.4 million tons by 2030. This marks the third lithium price supercycle following two previous cycles in the market.

According to news from the Chase Wind Trading Desk, this adjustment is based on UBS's comprehensive assessment of global electric vehicle and energy storage system demand, a renewed review of supply prospects, and the reality that lithium prices have risen about 65% since the last update. UBS's automotive and battery team's Q-Series report on the 5th pointed out that electric vehicles are approaching "triple parity" in terms of cost, range, and charging time. Their teardown analysis of five EV batteries shows battery costs have declined by about 50%, and lower costs are set to drive stronger demand.

UBS raised its 2026 spodumene price forecast by 74% to $3,131/ton, and both lithium carbonate and lithium hydroxide forecasts by 58% to $26,000/ton. The 2027 spodumene forecast is $3,469/ton, 22% higher than previous expectations. These price forecasts are significantly above market consensus, reflecting UBS's view of tight supply-demand conditions.

China's lithium inventories have continued to fall, supporting further price increases. Data shows that by the end of 2025, China's lithium carbonate inventory will drop sharply, with the number of inventory months decreasing significantly, indicating a tight supply chain. Meanwhile, the market will face a supply shortage and ongoing inventory consumption in 2025.

Demand Side: Dual Drivers of EVs and Energy Storage

UBS forecasts global lithium demand to grow 14% in 2026 and 16% in 2027. In the longer term, demand is expected to double from 1.7 million tons in 2025 to 3.4 million tons in 2030, with a compound annual growth rate of 13% before 2035.

EV demand remains on a solid growth trajectory. UBS research reached two key conclusions: First, EV sales will reaccelerate in the mid-term, though recent global EV growth may fall below the five-year CAGR of 13% due to policy shifts in the US, the achievement of "triple parity" will propel EV sales acceleration by the end of this century. UBS expects global EV penetration to reach 58% by 2035, compared to 23% in 2025. Second, Chinese automakers will continue to rise, remaining most competitive in mass-market segments.

Surging demand for energy storage systems is an important growth driver. China's new capacity pricing policies prompted UBS to increase its 2026-2035 energy storage demand forecast by 30-53%. The share of energy storage in lithium demand will rise sharply from 8% in 2020 to 42% in 2035, making it a major pillar of lithium consumption.

From a battery technology perspective, lithium iron phosphate (LFP) battery output continues to increase and is already the dominant share of global EV battery production as of end-2025. Plug-in hybrid electric vehicle (PHEV) market share is also steadily rising, providing additional support to lithium demand.

Supply Response: Growing But Still Failing to Meet Demand

The supply side is responding, but growth lags behind demand. Primary supply growth in 2025 is about 18%, or nearly 23% including recycling, still below demand growth of 26% (by lithium carbonate equivalent) and 29% (by total GWh). This results in market shortages and continuous inventory decline throughout the year.

Supply will react to rising prices and tightening markets. UBS expects risk-weighted supply to grow by about 20% YOY in 2027 and 13% in 2028. Although the speed of supply response is accelerating, market balance will remain tight amid robust demand growth.

Recycled supply will gradually increase but remains limited. Recycled lithium supply is expected to account for 5.3% of battery demand in 2026, rising to 6.7% by 2030. The growth of recycled supply will be adjusted according to market balance and price changes.

Price Outlook: Substantial Upward Revision But Still Within Historical Range

UBS raised lithium spodumene and chemical price forecasts by up to 74%. For 2026, the spodumene (6% Li2O) price forecast is $3,131/ton, 74% higher than the previous $1,800/ton and 73% above market consensus. Lithium carbonate and lithium hydroxide are both forecast at $26,000/ton, up 58% from previous forecasts, and 50% and 58% above market consensus, respectively.

The 2027 price forecasts remain strong. Spodumene is expected at $3,469/ton, while lithium carbonate and lithium hydroxide are both forecast at $28,525/ton. These levels represent significant premiums to market consensus, reflecting UBS’s more aggressive supply-demand tightness outlook.

Medium- and long-term price forecasts are relatively moderate. From 2028 to 2030, as supply response gradually comes into play, spodumene prices are expected to decline from $2,750/ton to $1,750/ton, and lithium carbonate and lithium hydroxide from $23,125/ton to $20,250/ton. Long-term real prices (based on 2026) will be maintained at spodumene $1,200/ton and lithium carbonate and lithium hydroxide at $18,000/ton.

UBS acknowledges that, given spot prices have historically exceeded long-term incentive prices by more than eightfold and converter profit margins have rarely provided a reliable basis for raw material pricing, choosing the appropriate price level is challenging. Qualitatively, current price forecasts are still within historical ranges, and EV manufacturers have historically adapted to price increases with limited impact on overall demand. For energy storage systems, the material cost is relatively less important than module and battery costs.

Market Balance: Shortages Support High Prices

Market balance data shows supply shortages are intensifying. The market will see a shortage of about 15,000 tons in 2025, expanding to an expected 18,000 tons in 2026. This ongoing shortage will support prices at high levels.

Inventory data confirm the tight situation. China's lithium carbonate inventory continues to decline from its 2023 peak, entering a rapid destocking phase by end-2025. Though there was a pause in December and January, the decline has recently resumed. Lower inventory levels and inventory months highlight supply chain tension. The destocking rate among downstream enterprises is especially notable, currently annualized at over 120,000 tons. Lithium hydroxide inventory is also decreasing, with the current annualized destocking rate at about 50,000 tons.

The supply-demand gap is expected to ease partially in 2027. As supply response comes online, the market is expected to see a surplus of about 61,000 tons in 2027, with some relief in price pressure. However, markets will return to shortage in 2029 and 2030, with 63,000 tons and 87,000 tons undersupply, respectively.

~~~~~~~~~~~~~~~~~~~~~~~~

The above highlights are from Chase Wind Trading Desk.

For more detailed interpretations, including realtime commentary and frontline research, please join [Chase Wind Trading Desk ▪ Annual Member]

Risk Warning and DisclaimerThe market carries risks and investment requires caution. This article does not constitute personal investment advice, nor does it take into account special investment objectives, financial situations or needs of individual users. Users should consider whether any opinions, views or conclusions in this article are suitable for their specific situations. Investment made on this basis is at your own risk.