Analysts at UBS have reduced their forecast for lithium demand due to an anticipated slump in appetite for electric vehicles (EV), according to a research note.
In a report prepared by UBS Securities Australia, analysts lowered their growth expectations for lithium by between three and 12 percentage points through to 2030.
UBS analysts are now expecting a moderate surplus in the supply of lithium until midway through the decade.
“We downgrade our lithium price deck 10-50% consistently across spodumene and chemical in sympathy with spot,” analysts said.
“In a shift from deficit to surplus, we would expect project capex to be slowed and, while highly uncertain, would point to cost support starting to impact ~US$18-$20/kg for chemical.
“While we trim our demand outlook, we still see new capacity needed consistent with our supply-side modelling despite moderate surpluses through mid-decade and a smaller deficit at end-decade (~280kt/8% of 2030E demand vs 740kt/18% prior).”
In line with these reduced expectations, UBS downgraded Pilbara Minerals Ltd (ASX:PLS) from 'neutral' to a ‘sell’ rating, reiterated its 'sell' rating for Mineral Resources Ltd (ASX:MIN), while IGO Limited (ASX:IGO) remains a ‘buy’.
Analysts now expect lower EV demand this decade as a result of political and macroeconomic uncertainty, shrinking subsidies and a fundamental lack of charging infrastructure.
“Our global autos team has cut EV penetration to 18% in 2024 (prev: 20%) with significant cuts for Europe and the US where they now expect growth of 10-15% (prev: 35-45%),” they said in the note.