UBS Lowers Lithium Price Outlook Due to Weaker EV Demand - Implications for Producers and Equities
UBS, a leading brokerage, has revised its lithium price outlook in response to a slowdown in electric vehicle (EV) demand. The analysis of auto production, EV sales, and battery demand has led to a 10% reduction in automotive battery demand forecast through 2030. This shift is primarily due to a decline in global EV sales growth, particularly in major markets like China, the European Union, and the United States.
The rise of plug-in hybrid electric vehicles (PHEVs), which use smaller batteries than fully electric vehicles (BEVs), has also contributed to the decreased demand for automotive batteries. As a result, UBS has adjusted its global lithium demand outlook downward by approximately 10% for the next decade.
Despite some lithium supply projects being deferred, the reduction in supply is not enough to offset the weakening demand. This has led UBS to mark-to-market spot prices and downgrade chemical and spodumene prices by up to 23%. If spodumene prices remain low, production delays and shutdowns are expected.
Looking ahead, the future of the lithium market will depend on African primary lithium supply and Chinese primary and conversion supply. These regions will play a crucial role in balancing supply and demand.
The downgrades in lithium price forecasts have significant repercussions for lithium producers, with several key players seeing price target reductions. For example, Pilbara Minerals and Mineral Resources have had their price targets lowered due to anticipated lower earnings and cash flow.
In conclusion, the current market downturn in the lithium industry is driven by weaker EV demand and a surplus in supply. Investors should pay attention to the evolving dynamics of the lithium market and the impact on key players in the industry.