UBS: Lithium — Catching Up with Analyst Sky Han: Risk-Reward Skews to the Upside
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Following discussions with UBS China Lithium Analyst Sky Han, UBS assesses the risk-reward balance for lithium prices as skewing toward the upside. On the demand side, electric vehicle (EV) purchases are expected to recover from a sluggish January, while energy storage systems (ESS) present notable upside risks. This resilience is supported by export tax rebate reductions—declining from the current 9% to 6% in April 2026 and 0% in January 2027—alongside the implementation of China's national capacity mechanism. The global battery energy storage system (BESS) pipeline for 2026–2030 has consequently expanded to 1.9 TWh.
Conversely, UBS maintains that its supply forecasts remain below broader market consensus. Production disruptions among lepidolite producers in Jiangxi, excluding CATL, alongside licensing bottlenecks and underestimated supply chain lags, are tightening the market. The restart of CATL's Jianxiawo operation remains uncertain due to new environmental concerns, with UBS modeling an April 2026 restart. Furthermore, inventory levels across the supply chain are critically low, with spodumene concentrate, lithium chemicals, and cathode materials each holding approximately two weeks of stock.
Fundamentally, Sky identifies a justified trading range of RMB 120,000 to 180,000 per ton. However, if speculative positioning intensifies, prices could exceed RMB 200,000 per ton, well above prevailing spot rates.