UBS bullish on "China Lithium," raises lithium price forecast; industry insiders say their supply release outlook is somewhat conservative, and energy storage demand estimates are somewhat high

In early February and during the Spring Festival holiday, UBS, one of the world’s top investment research institutions, released a series of reports clearly bullish on “Chinese lithium.” Not only did they significantly raise price forecasts for spodumene and lithium carbonate, but they also explicitly stated that the market has entered the third supercycle of lithium prices.

The reports pointed out that the gradual realization of the “threefold balance” in electric vehicles and the global explosion in energy storage demand will drive sustained growth in lithium demand. They also highlighted three Chinese lithium companies—Tianqi Lithium, Ganfeng Lithium, and China Salt Lake—and raised their earnings expectations accordingly.

However, industry insiders noted that UBS’s assessment of the market’s supply release capacity is somewhat conservative, and their expectations for demand from energy storage batteries may be overly optimistic (high lithium prices, pressure on storage costs).

UBS Continues to Favor China’s Electric Vehicle and Energy Storage Markets

“Welcoming the God of Wealth on the fifth day of the Lunar New Year” is a folk saying expressing people’s hopes for wealth. During the Spring Festival, a positive piece of news emerged for the global lithium industry—UBS, a top-tier investment research firm, expressed a clear bullish stance on “Chinese lithium.”

On February 18, UBS published an analysis report stating that electric vehicles are approaching the realization of the so-called “threefold balance,” a goal previously considered theoretical that is now gradually becoming a reality. Recently, UBS’s electric vehicle team disassembled five next-generation battery cells to assess the development speed of the EV industry.

The analysis shows that the industry is at a critical turning point: the gap in cost, range, and charging time between electric and traditional vehicles continues to narrow, bringing the much-anticipated “threefold balance” within reach.

Data indicates that the current cost of a single battery has fallen to $55 per kilowatt-hour, nearly 50% lower than UBS’s 2020 analysis, and manufacturing costs are still decreasing at about 10% annually. UBS predicts this trend will not only transform the passenger car industry but also create new turning points in trucks, fixed energy storage, and other fields.

UBS pointed out that China’s low battery costs will help Chinese automakers capture a larger share of the global EV market, with an expected increase to about 35% by 2030. This industry transformation is triggering ripple effects across vehicle manufacturing, batteries, trucks, energy storage, and even humanoid robots.

According to a reporter from Meiri Daily, on February 5, UBS Global Research released the report “Lithium: Stronger, Faster, Higher” (commonly referred to as the “Third Lithium Supercycle” report in China).

On the morning of February 7, Wind (Wande) official WeChat account mentioned that UBS announced a substantial upward revision of lithium price forecasts, with spodumene prices raised by 74% to $3,131 per ton, and lithium carbonate adjusted to $26,000 per ton (about 185,000 RMB/ton; current futures prices are around 150,000 RMB/ton). UBS expects global lithium demand to double to 3.4 million tons by 2030. UBS believes the market has entered the third supercycle of lithium prices. The official WeChat account of Eastmoney’s Choice platform noted that these price forecasts are significantly higher than market consensus, reflecting UBS’s view of supply-demand tensions.

In December last year, UBS published a report titled “China Lithium: Raise price targets for China Lithium companies due to strong BESS demand,” focusing on the Chinese lithium market.

A comparison by the reporter shows that UBS’s latest report is markedly more optimistic, stating that lithium is entering its third major pricing cycle, driven by strong structural demand and lagging supply response. Analysts forecast that global lithium demand will grow by 14% in 2026 and 16% in 2027, mainly due to rising EV sales and accelerated investment in battery energy storage systems (BESS). The main driver of demand in this cycle is energy storage, which has upgraded from a “Chinese market” to a “global explosion.” UBS explicitly states that by 2035, energy storage will account for 42% of global lithium demand.

Industry: The report’s assessment of supply release capacity is conservative

Beyond demand, the market has also quantified supply rigidity constraints: for example, low lithium prices in 2024–2025 will lead to the clearance of over 30% of high-cost global capacity; global lithium mine expansion projects face high delays; and the global lithium supply growth rate in 2026 has been sharply revised downward from 20% to 10%, far below demand growth.

On February 21, a lithium company’s secretary told a reporter, “It’s only February now, so it’s hard to make a full-year lithium price forecast, but overall, 2026 is likely to be a good year. Regarding the supply situation mentioned earlier, we believe that mine operations are usually complex, and actual supply increases tend to be slightly lower than expected.”

On the same day, a Meiri Daily reporter inquired with two long-term lithium material analysts about UBS’s report.

One analyst said, “The report is reliable and aligns with expectations. The A-share market already responded in Q4 last year.” They noted that the lithium industry-related content in the report is not new, and the A-share market had already revised upward expectations for lithium demand. From the futures market perspective, Q4 last year was a major rally phase for lithium carbonate, with a price increase of 65.67%, and the highest price exceeding 130,000 RMB/ton.

Another analyst commented, “From a purely conclusion standpoint, the supply increase estimates are conservative, likely based on assumptions that many announced new projects are difficult to realize or will release less than expected.” Regarding energy storage demand, they said that the current lithium price of 150,000 RMB/ton is within an acceptable range, but the industry’s capacity to bear high prices is mostly based on theoretical calculations, which often underestimate actual market conditions. “If we consider this a reasonable price range, it’s somewhat high, but in the metals market, deviations from the reasonable range are common.”

The core reason is that lithium carbonate costs constitute a relatively high proportion of downstream industry chain costs, and energy storage is a B2B (business-to-business) model. Market participants can clearly estimate the negative feedback that excessively high lithium prices might trigger and have a clear expectation of such feedback. A general manager of a listed lithium battery company said that UBS’s conclusions are consistent with his own perceptions; regarding whether energy storage demand can withstand rising lithium prices, he said it might be near breakeven. However, the complexity of energy storage lies in the varying power generation revenues across regions, so specific situations need to be assessed case by case.

Overall, interviewees believe that UBS’s assessment of supply release capacity is conservative, while their expectations for energy storage battery demand may be overly optimistic.

The report raises expectations for related companies

UBS’s report specifically mentions three Chinese companies—Tianqi Lithium, Ganfeng Lithium, and China Salt Lake—and raises their earnings forecasts. Their valuation model aligns with a cyclical stock investment strategy—initial high P/E during profit early stages, lower P/E as profits rise, often summarized as “buy high P/E, sell low P/E.”

In fact, these three companies also represent three current styles in the lithium market, each being a leader in its respective category.

The first is resource-driven, exemplified by Tianqi Lithium, which relies on high-quality global hard-rock lithium resources to build a competitive moat. The company owns the world’s largest and highest-quality Greenbushes spodumene mine, leading in lithium extraction from hard rock, with a resource self-sufficiency rate of 100%. Its control over core resources provides strong resilience against industry cycles, focusing on resource advantages for high efficiency and profitability, making it a typical resource barrier enterprise.

The second is the integrated, diversified model represented by Ganfeng Lithium, which pursues a multi-resource and vertical integration approach. The company covers spodumene, lepidolite, and salt lake resources, creating a complete industry chain from resource extraction to lithium salt processing, battery manufacturing, and recycling. On February 10, Ganfeng Lithium announced that its Zhejiang Fengli developed a 320 Wh/kg high-energy, high-power eVTOL (electric vertical takeoff and landing) battery had been officially installed in the Wofei Changkong AE200-100 aircraft.

The third is the cost-advantaged model, represented by China Salt Lake (Salt Lake Co.), focusing on salt lake lithium extraction. Relying on the rich lithium resources of the Qarhan Salt Lake, it has formed a business structure of “potash fertilizer core + lithium salt growth pole,” utilizing resource tiering to achieve potassium-lithium synergy. The company maintains low production costs for lithium carbonate through mature extraction technology and lean management, further amplifying its cost advantage and establishing a foothold in the industry with low-cost operations.

On February 21, the reporter also learned about recent production statuses of these companies. A Tianqi Lithium representative stated that all domestic bases are operating normally. A Ganfeng Lithium representative said, “Production was normal during the Spring Festival, and demand this year is recognized as ‘not weak during the off-season.’ Overall, UBS’s report is quite optimistic.” Notably, Tianqi Lithium and Ganfeng Lithium are listed in Hong Kong stocks, but their recent stock performance has been flat.

(Article source: Daily Economic News)