UBS cuts lithium prices forecast on weak EV demand
Story by Investing.com
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Analysts at UBS attribute the lowered demand forecast primarily to a slowdown in global EV sales growth, particularly in major markets such as China, the European Union, and the United States.
The decline in automotive battery demand is further compounded by the growing popularity of plug-in hybrid electric vehicles (PHEVs), which use smaller batteries than fully electric vehicles (BEVs).
As a result, UBS now forecasts a 10% reduction in automotive battery demand through 2030, reflecting both lower EV sales and a shift towards smaller battery sizes.
These trends have led UBS to revise its global lithium demand outlook downward by approximately 10% through the end of the decade.
While some lithium supply projects are being deferred, the reduction in supply is insufficient to offset the weakening demand.
“While we note some supply is being deferred, it is not enough, and as a result we mark-to-market spot prices and downgrade CY25/26E chemical and spodumene prices by up to 23%,” the analysts said.
UBS notes that while large-scale production cuts have not yet occurred, low prices may lead to production delays and deferrals of growth projects. If spodumene prices remain at the current spot level of around $770 per ton (for SC6, spodumene) for the next year to year and a half, further shutdowns are expected.
Despite these challenges, supply is expected to remain strong, leading to a surplus that UBS predicts will continue until at least 2027.
Looking ahead, the future dynamics of the lithium market will likely hinge on a deeper understanding of African primary lithium supply and Chinese primary and conversion supply, both integrated and non-integrated.
These regions are expected to play a crucial role in the evolving supply-demand balance, and their impact will be a key factor in determining the extent and duration of the current market downturn.
The downgrades in lithium price forecasts have significant repercussions for lithium producers, particularly those nearing or already in production.
UBS analysts have issued downgrades for several key players in the lithium market. For instance, Pilbara Minerals has seen its price target reduced to $2.30 per share, with UBS maintaining a “sell” rating. This reduced target reflects anticipated lower earnings, free cash flow, and pressure on capital expenditures and dividends due to the weaker lithium prices.
