UBS Group AG has announced substantial upward revisions to its lithium price projections, with increases reaching as high as 74%, while forecasting that global lithium demand will double to 3.4 million tons by 2030 compared to 2025 levels. This development signals the emergence of the third major lithium price cycle following two previous market cycles.

The adjustment stems from UBS's comprehensive evaluation of global electric vehicle and energy storage system demand, a reassessment of supply outlooks, and the reality that lithium prices have already climbed approximately 65% since the last update. According to the bank's automotive and battery team's Q-Series report, electric vehicles are approaching "triple parity" in cost, range, and charging time. Their analysis of five electric vehicle batteries revealed that battery costs have decreased by about 50%, with lower costs expected to drive stronger demand.

UBS has raised its 2026 spodumene price forecast by 74% to $3,131 per ton, while increasing lithium carbonate and lithium hydroxide price projections by 58% to $26,000 per ton each. The 2027 spodumene price forecast stands at $3,469 per ton, representing a 22% increase from previous expectations. These price projections significantly exceed market consensus, reflecting UBS's assessment of tightening supply-demand dynamics.

Declining lithium inventories in China are providing support for price increases. Data indicates substantial reductions in China's lithium carbonate inventories by the end of 2025, with inventory months significantly reduced, suggesting supply chain constraints. Meanwhile, market supply shortages emerged in 2025, leading to continuous inventory drawdowns.

On the demand side, electric vehicles and energy storage systems are driving growth. UBS predicts global lithium demand will increase by 14% in 2026 and 16% in 2027. Long-term, demand is expected to double from 1.7 million tons in 2025 to 3.4 million tons by 2030, with a compound annual growth rate of 13% through 2035.

Electric vehicle demand maintains steady growth momentum. UBS research identifies two key conclusions: first, electric vehicle sales will reaccelerate in the medium term, with "triple parity" achievement driving accelerated sales growth toward the end of the decade. UBS anticipates global electric vehicle penetration reaching 58% by 2035, up from 23% in 2025. Second, Chinese automakers will continue their rise, demonstrating strongest competitiveness in the mass-market segment.

Energy storage system demand is surging as a significant growth driver. China's new capacity pricing policies prompted UBS to raise its 2026-2035 energy storage demand forecasts by 30-53%. Energy storage's share of lithium demand will dramatically increase from 8% in 2020 to 42% by 2035, becoming a major pillar of lithium consumption.

From a battery technology perspective, lithium iron phosphate (LFP) battery production continues to gain market share, dominating global electric vehicle battery production by the end of 2025. Plug-in hybrid electric vehicle (PHEV) market share is also steadily increasing, providing additional support for lithium demand.

Supply response is occurring but remains insufficient to meet demand. Primary supply grew approximately 18% in 2025, reaching nearly 23% when including recycling, yet still falling short of demand growth of 26% (measured in lithium carbonate equivalent) and 29% (in total GWh terms). This resulted in market shortages and continuous inventory reductions throughout the year.

Supply will respond to price increases and market tightening. UBS expects risk-weighted supply to grow about 20% year-over-year in 2027 and 13% in 2028. While this supply response is accelerating, market balance will remain tight amid robust demand growth.

Recycled supply will gradually increase but remain limited in proportion. Recycled lithium supply is projected to account for 5.3% of battery demand in 2026, rising to 6.7% by 2030. The growth rate of recycled supply will adjust according to market balance and price changes.

Price outlook reflects substantial upward revisions while remaining within historical ranges. UBS has raised spodumene and chemical price forecasts by up to 74%. For 2026, spodumene (6% Li2O) price projection stands at $3,131 per ton, representing a 74% increase from the previous $1,800 per ton forecast and 73% above market consensus. Lithium carbonate and lithium hydroxide price forecasts are both set at $26,000 per ton, marking 58% increases from previous projections and exceeding market consensus by 50% and 58% respectively.

2027 price forecasts indicate continued strength. Spodumene price projection is $3,469 per ton, with lithium carbonate and lithium hydroxide both at $28,525 per ton. These price levels show significant premiums to market consensus, reflecting UBS's more aggressive assessment of supply-demand tightness.

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

UBS acknowledges the difficulty in selecting appropriate price levels given that spot prices have historically exceeded long-term incentive prices by more than eight times, and converter margins historically provide limited reference for reasonable raw material pricing. However, from a qualitative perspective, current price forecasts remain within historical ranges. For electric vehicle manufacturers, historical evidence shows ability to adapt to price increases with limited impact on overall demand. For energy storage systems, material costs hold lower importance relative to module and battery system costs.

Market balance indicates intensifying supply shortages. The market experienced approximately 15,000 tons of shortage in 2025, with the shortfall expected to expand to 18,000 tons in 2026. This persistent shortage will support sustained high price levels.

Inventory data confirms the tight situation. China's lithium carbonate inventories have continued to decline from 2023 highs, entering a rapid destocking phase by the end of 2025. Although destocking paused in December and January, recent data shows renewed declines. Reduced inventory levels and inventory months indicate supply chain constraints. Downstream enterprise inventory reductions are particularly notable, with current annualized destocking rates exceeding 120,000 tons. Lithium hydroxide inventories also continue to decline, with current annualized destocking rates around 50,000 tons.

The supply-demand gap is expected to partially ease by 2027. As supply responses materialize, the market is projected to experience approximately 61,000 tons of surplus in 2027, alleviating some price pressure. However, markets will return to shortage conditions in 2029 and 2030, with deficits of 63,000 tons and 87,000 tons respectively.