On Wednesday, A-share lithium mining stocks experienced a strong rally, with the entire lithium battery industry chain surging. Yongxing Materials and Yongshan Lithium hit the daily upside limit, while companies like Penghui Energy, Hunan Yueneng, and Tianhua New Energy also posted significant gains. Amid the repeated activity in lithium mining stocks, UBS substantially raised its lithium price forecasts, stating this cycle is fundamentally different from previous ones.
According to analysis, UBS Securities analyst Lachlan Shaw wrote in a research report: "This cycle features three concurrent demand-side drivers – stronger energy storage, improved electric vehicle (EV) economics, and accelerated penetration of electric trucks in China – while the supply side will respond, but at a slower pace." On price projections, the near-term forecast for 6% Li2O spodumene concentrate was raised by up to 23%, with the long-term price increased by 17% to $1,400 per ton. Mid-term forecasts for battery-grade lithium carbonate and lithium hydroxide were raised by 17%-47%, though long-term prices remain unchanged.
Notably, the key adjustment is not just individual price points but a reassessment of the supply-demand trajectory for 2026-2027. The model projects global lithium demand will increase from 1.702 million tons LCE (lithium carbonate equivalent) in 2025 to 1.974 million tons in 2026 and 2.324 million tons in 2027, representing a two-year demand increase of approximately 623,000 tons LCE. Over the same period, risk-weighted supply is expected to increase by about 596,000 tons LCE, indicating demand growth slightly outpacing supply.
The report does not assume a disappearance of supply. On the contrary, it acknowledges that past cycles have proven lithium supply can ramp up relatively quickly. However, this time, the absolute scale of new demand is larger, while new projects face more policy, geological, and commercial constraints. In other words, the lithium market will see a supply response, but the response time may not be sufficiently short.
Energy storage is raising the base level of lithium demand. A significant starting point for this price forecast revision is battery energy storage systems (BESS). Geopolitical shocks, rising oil and gas prices, increased power demand from data centers driven by AI, combined with an expected 30% cost reduction for BESS systems, are driving an upward revision of global energy storage demand. Global BESS demand is projected to reach about 1.6 TWh by 2030, a 6% increase from previous forecasts, with larger upward revisions in the US and other regions.
The project pipeline also adds confidence. Based on Benchmark Mineral Intelligence data, the global BESS project pipeline for 2026-2030 totals over 2.1 TWh (2,131 GWh). Regionally, China accounts for 46%, North America 18%, Europe 12%, Oceania 12%, Asia (ex-China) 4%, the Middle East 3%, South and Central America 4%, and Africa 1%. It's important to note that the pipeline includes all stages from proposed to operational, and not all projects will necessarily be completed on schedule. Even with discounts applied, energy storage is no longer a marginal component of lithium demand.
The EV segment shows divergence. As of March, year-to-date EV sales in Germany, France, and the UK grew 34%, 40%, and 22% year-over-year, respectively. The US market remains under pressure. China's situation is more complex: it accounts for about 60% of global EV sales, but March performance was relatively weak, down 18% year-over-year. However, as Chinese EV sales are typically stronger in the second half of the year, a rebound in H2 is still anticipated.
The global EV sales assumptions used are also more aggressive than the previous model. The prior assumption was a 12% compound annual growth rate (CAGR) for the next two years, but that forecast was made before the recent US-Iran tensions. The lithium supply-demand model now uses a more constructive assumption of a 15% CAGR over two years.
March data from China's battery chain provides support. Data from the China Automotive Battery Industry Innovation Alliance (CABIA) shows: - EV registrations in March were 798,000 units, up 86% month-over-month but down 18% year-over-year, an improvement over the 27% year-over-year decline for January-February combined. - Vehicle exports in March were 690,000 units, up 76% year-over-year, with EVs comprising 50.6%. - EV battery sales in March were 114.5 GWh, up 54% month-over-month and 31% year-over-year. - Energy storage battery sales in March were 60.3 GWh, up 56% month-over-month and 115% year-over-year.
Based on this, global battery demand is projected to increase from 1.476 TWh in 2025 to 1.811 TWh in 2026 and 2.353 TWh in 2027.
Supply will chase demand, but may not match its growth rate this time. The assessment of supply is not aggressively bearish; the question is not if supply can catch up, but when. From 2025 to 2027, the main new supply in the model is expected from Australia, China, and Africa. Australia is projected to contribute about 23% of the supply increase, sourced from projects like Kathleen Valley, Pilgangoora, and Greenbushes, though Greenbushes has been revised down due to IGO's reduced production guidance. China is expected to contribute about 28%, including significant new supply from Qinghai salt lakes and the restart of Contemporary Amperex Technology Co. Limited's (CATL) Jianxiawo mine. The report estimates that from mid-2026, Jianxiawo could account for about 44% of Chinese supply. In Africa, developments are being tracked at Goulamina in Mali, and Kamativi and Arcadia in Zimbabwe. Arcadia faces policy challenges, as Zimbabwe requires domestic midstream processing, complicating the project.
There is potential for supply to exceed expectations, especially from regions with lower transparency, such as DSO in Nigeria. However, the report also suggests that in an environment of heightened macro uncertainty, diesel and input cost disruptions, and volatile lithium prices, listed producers will prioritize higher certainty before restarting, expanding, or building new projects, which could suppress the speed of the potential supply response.
Inventories offer little buffer for the market. Chinese inventory signals also support a tight market view. Data from SMM and other sources indicate that while weekly Chinese lithium carbonate inventories have recently increased, they remain near historical lows when measured in months of inventory, suggesting overall supply chain tightness. Monthly lithium carbonate inventory levels are comparatively low year-over-year. If seasonal patterns for orders and inventory restocking continue, processor inventories might rise in the coming months. Lithium hydroxide inventories continued to decline in the early months of 2026. Although inventory months rose in February due to the short month and seasonal factors, absolute inventory levels remained tight before the onset of the regular order and restocking season.
The most aggressive price adjustments are for 2027, but long-term chemical lithium prices remain unchanged. In the new price forecasts, 2027 stands out as the most notable year. Forecasts for 6% Li2O spodumene concentrate prices are: - 2026: $3,148/ton, up 1% from previous forecast. - 2027: $4,250/ton, up 23%. - 2028: $3,250/ton, up 18%. - 2029: $2,375/ton, up 6%. - 2030: $1,813/ton, up 4%. - Long-term price: $1,400/ton, up 17%.
Forecasts for battery-grade lithium carbonate prices are: - 2026: $30,519/ton, up 17%. - 2027: $41,875/ton, up 47%. - 2028: $34,000/ton, up 47%. - 2029: $27,000/ton, up 35%. - 2030: $21,625/ton, up 7%. - Long-term price: $18,000/ton, unchanged.
Forecasts for battery-grade lithium hydroxide are largely consistent with lithium carbonate: $30,314/ton for 2026, $41,875/ton for 2027, $34,000/ton for 2028, $27,000/ton for 2029, $21,625/ton for 2030, with the long-term price unchanged at $18,000/ton.
The long-term spodumene price was raised due to persistent capital expenditure and operating cost inflation in key mining regions like Canada and Australia. The long-term chemical lithium price was not revised upwards, relating to compressed margins in the Chinese conversion sector.
The unresolved challenge lies beyond 2030. The lithium market is projected to have a deficit of 6,000 tons LCE in 2025, widening to 84,000 tons in 2026. A near-balance is expected in 2027, but with a slight remaining deficit, followed by continued deficits from 2028 to 2031. The outlook beyond 2030 is more cautious: to meet the projected structural deficit, new greenfield projects will become increasingly important, but significant uncertainty remains regarding which projects will ultimately fill this gap.
This is the core implication of the report: it's not that lithium supply won't return, but that after demand re-accelerates, the market will require higher prices for a longer duration to incentivize the next wave of sufficiently large supply.
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