Third Lithium Supercycle! UBS: Fully Upgrades Lithium Price Forecast, Demand Expected to Double by 2030

UBS Announces Significant Upward Revision of Lithium Price Forecasts, with Increases of up to 74%, and Projects Global Lithium Demand to Double from 2025 to 2030 to 3.4 million tons. This marks the third supercycle of lithium prices following the previous two cycles.

According to Wind Trading Desk, this adjustment is based on UBS’s comprehensive assessment of global electric vehicle and energy storage system demand, a reassessment of supply prospects, and the market reality that lithium prices have risen approximately 65% since the last update. In its Q-Series research report on May 5th, UBS’s automotive and battery team pointed out that electric vehicles are approaching “triple parity” in cost, range, and charging time. An analysis of five EV batteries shows battery costs have decreased by about 50%, and lower costs will drive stronger demand.

UBS has raised its 2026 spodumene (6% Li2O) price forecast by 74% to $3,131/ton, with lithium carbonate and lithium hydroxide prices both increased by 58% to $26,000/ton. The 2027 spodumene price 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 and demand.

Chinese lithium inventories continue to decline, supporting price increases. Data shows that lithium carbonate inventories in China sharply decreased by the end of 2025, with inventory months significantly reduced, indicating a tight supply chain. Meanwhile, the market experienced supply shortages in 2025, with inventories continuously being depleted.

Demand Side: Electric Vehicles and Energy Storage Drive Growth

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

Demand for electric vehicles remains steady. UBS research concludes two key points: First, EV sales will accelerate again in the medium term. Although U.S. policy shifts may temporarily slow global EV growth below the 13% CAGR of the past five years, the realization of “triple parity” will boost EV sales toward the end of this century. UBS expects global EV penetration to reach 58% by 2035, up from 23% in 2025. Second, Chinese automakers will continue to rise, especially in the mass-market segments, where they are most competitive.

The surge in energy storage system demand is a significant growth driver. China’s new capacity pricing policies have led UBS to raise its 2026-2035 energy storage demand forecasts by 30-53%. The share of energy storage in lithium demand will jump from 8% in 2020 to 42% in 2035, becoming a major pillar of lithium consumption.

From a battery technology perspective, the share of lithium iron phosphate (LFP) batteries continues to rise, dominating global EV battery production by the end of 2025. The market share of plug-in hybrid electric vehicles (PHEVs) is also steadily increasing, providing additional support for lithium demand.

Supply Response: Growth but Still Insufficient to Meet Demand

Supply is responding but lagging behind demand growth. In 2025, primary supply is expected to grow by about 18%, and including recycling, nearly 23%, still below demand growth of 26% (in lithium carbonate equivalent) and 29% (in total GWh). This has led to shortages, with inventories decreasing throughout the year.

Supply will respond to rising prices and tightening markets. UBS expects risk-weighted supply to grow about 20% year-over-year in 2027 and 13% in 2028. Although supply response is accelerating, the market will remain tight amid strong demand.

Recycling supply will gradually increase but will remain a limited share. In 2026, recycled lithium supply is expected to account for 5.3% of battery demand, rising to 6.7% by 2030. The growth rate of recycled supply will adjust according to market balance and price changes.

Price Outlook: Significant Upward Revision but Still Within Historical Range

UBS has revised upward its price forecasts for spodumene and chemicals by as much as 74%. For 2026, the spodumene (6% Li2O) price forecast is $3,131/ton, up 74% from the previous $1,800/ton, and 73% above market consensus. Lithium carbonate and lithium hydroxide prices are both forecast at $26,000/ton, up 58% from previous estimates, and 50-58% above market consensus.

The 2027 price forecasts remain strong. Spodumene is projected at $3,469/ton, with lithium carbonate and lithium hydroxide at $28,525/ton. These levels carry significant premiums over market consensus, reflecting UBS’s more aggressive view of supply-demand tightness.

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

UBS acknowledges that, historically, spot prices have been more than 8 times higher than incentive prices, and that the profit margins of converters have historically made it difficult to establish reasonable raw material prices. However, from a qualitative perspective, current price forecasts remain within historical ranges. For EV manufacturers, past ability to absorb price increases has limited overall demand impact; for energy storage systems, material costs are less significant relative to module and battery costs.

Market Balance: Shortages Support Prices

Market balance data shows shortages are intensifying. In 2025, a shortage of about 15,000 tons is expected, expanding to 18,000 tons in 2026. This ongoing shortage will support high prices.

Inventory data confirms the tight situation. Chinese lithium carbonate inventories have been declining since the 2023 peak, entering a rapid drawdown phase by the end of 2025. Although there was a pause in December and January, inventories have recently resumed declining. The reduction in inventory levels and months of inventory indicates supply chain tightness. Downstream companies’ inventory depletion rate is particularly notable, with an annualized depletion exceeding 120,000 tons. Lithium hydroxide inventories are also decreasing, with an annualized depletion rate of about 50,000 tons.

The supply-demand gap is expected to partially ease in 2027. With supply responses in place, the market is projected to see a surplus of about 61,000 tons in 2027, easing price pressures. However, shortages are expected again in 2029 and 2030, with deficits of 63,000 tons and 87,000 tons, respectively.

All the above content is from Wind Trading Desk.

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