UBS Cuts Lithium Price Estimates on Weak Electric Vehicle Demand by Investing.com

Investing.com — UBS in a note on Monday revised down its outlook for lithium prices due to weaker-than-expected demand for electric vehicles. The brokerage’s analysis of car production, electric vehicle sales and battery demand led to a lower forecast for lithium demand through 2030. This has implications for lithium producers and their stocks, resulting in lower price targets for more many companies.

Analysts at UBS attribute the decline in demand mainly to a slowdown in global electric vehicle sales growth, particularly in major markets such as China, the European Union and the United States.

The decline in demand for car batteries is further exacerbated 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 demand for car batteries by 2030, reflecting both lower sales of electric vehicles and a shift to smaller battery sizes.

These trends have prompted UBS to revise its outlook for global lithium demand down by about 10% by the end of the decade.

While some lithium supply projects are delayed, the reduction in supply is insufficient to compensate for the weakening of demand.

“While we see some supply being delayed, it is not enough and accordingly we are assessing spot market prices and lowering CY25/26E chemicals and spodumene prices by up to 23%,” the analysts said.

UBS notes that while no large-scale production cuts have yet occurred, low prices may lead to production delays and postponement of growth projects. If spodumene prices remain at the current level of around $770 per tonne (for SC6, spodumene) for the next year to a year and a half, further stops are expected.

Despite these challenges, supply is expected to remain strong, leading to a surplus that UBS expects to continue until at least 2027.

Looking ahead, future lithium market dynamics will likely depend on a deeper understanding of African primary lithium supply and China’s primary and conversion supply, both integrated and non-integrated.

These regions are expected to play a crucial role in the evolution of the supply-demand balance, and their impact will be a key factor in determining the extent and duration of the current market downturn.

Downgrades to lithium price forecasts have significant repercussions for lithium producers, especially those approaching or already in production.

UBS analysts have issued downgrades for several key players in the lithium market. For example, Pilbara Minerals saw its price target cut to $2.30 per share, with UBS maintaining a “sell” rating. This reduced target reflects lower expected earnings, free cash flow and pressure on capital expenditures and dividends from weaker lithium prices.

UBS downgraded Mineral Resources (ASX:) and set a new price target of $43.00 per share. Due to its dependence on iron ore and lithium prices, the mineral resource is expected to be significantly affected by the predicted downturn in the lithium market.

The brokerage has issued “neutral” ratings on IGO (ASX:) and Liontown Resources (ASX:) with revised price targets of $5.40 and $0.85 per share respectively. While these companies face challenges from the weaker lithium market, their exposure is not as significant as some others.

UBS maintains a “buy” rating. Patriot Battery Metals (TSX: ), with a price target of $1.00 per share. Despite broader market challenges, UBS sees potential in Canada’s Patriot Corvette project, which is well-positioned for long-term growth in the lithium industry.

UBS adjusted its lithium price forecast to reflect slower demand growth, sufficient supply growth and the current market price trend. The brokerage cut its forecasts for lithium chemicals and raw materials prices by as much as 23% for 2025-2027 due to expected surpluses caused by resilient supply and slowing demand.