Second Wave of Lithium Supply to Reshape Global Market Dynamics
The global lithium market is on the brink of significant changes, as a new wave of supply is set to enter the market. Analysts at UBS have identified this upcoming surge in lithium supply from emerging sources in Africa and China as a key factor in reshaping the market’s dynamics.
The emergence of new lithium supply is no longer just a distant prediction but a rapidly approaching reality. UBS analysts highlight Africa and China as the primary regions driving this new wave of supply, with Africa expected to contribute nearly 10% of global lithium supply by 2028.
Chinese lepidolite producers and operators of African spodumene assets are poised to become significant players in the lithium market, with lower production costs than previously anticipated. This cost advantage could lead to downward pressure on global lithium prices, potentially redefining the pricing floor for lithium on a global scale.
UBS has adjusted its lithium price forecasts downward due to the expected increase in supply from Africa and China, predicting potential oversupply in the market by the mid-2020s. This oversupply could result in substantial price reductions, leading to a 3-26% downgrade in near-term lithium price forecasts for the years 2025-2028.
Despite the anticipated surge in supply, the long-term forecast for lithium carbonate remains stable at $19,000 per tonne. However, the influx of new supply is expected to have significant implications for lithium producers and investors, with UBS downgrading ratings on several lithium equities.
The arrival of a second wave of lithium supply from Africa and China is poised to transform the global lithium market, addressing concerns about meeting future demand while posing challenges for existing producers. Market participants should prepare for potential price volatility and lower returns, as the entry of new, lower-cost suppliers is expected to prompt a market recalibration with profound long-term effects on pricing and supply dynamics.