Commodities | 11:00 AM
A glance through the latest expert views and predictions about commodities. Expected growth in EV demand; impact on lithium prices; aluminium supply shock.
- Global EV sales projected to more than double by 2035
- Might this time be different for lithium?
- Largest supply shock in at least 50 years for aluminium
By Greg Peel
Electric Vehicles
Global electric vehicle (EV) sales grew strongly in 2025, Macquarie notes, increasing by more than 20% year on year. Growth was broad-based outside the US and, for the first time since 2022, was strongest in battery EVs rather than plug-in hybrids.
However, sales growth appeared likely to slow in 2026 amid policy changes in the US and China.
This has proven to be the case, with global EV sales flat in the first four months of 2026 relative to the same period in 2025, yet the headline figure masks significant regional divergence, with weakness in the US and China and strength elsewhere, Macquarie notes.
EV sales fell -33% in the US over the first four months of 2026. Trump’s EV policy rolled back federal incentives, tax credits, and infrastructure (chargers) funding, significantly slowing EV adoption and affecting automakers’ strategies.
EV sales fell -17% in China over the same period. The expiration of tax exemptions and subsidies are partly to blame, but cooling domestic demand can also be attributed to a weaker Chinese consumer, and rising input costs making EVs more expensive.
By contrast, sales rose by 26% in Europe and by 77% in the rest of the world over the same period.
Overall weakness was more pronounced earlier in the year, with EV sales bouncing in recent months alongside higher oil prices amidst the largest oil supply disruption in history.
In seasonally adjusted terms, EV sales rose by 9% between February and April, with gains broad-based across major regions.
We think of EVs as cars, but Macquarie reports EVs' share of total light vehicle sales is at or near historical highs in most regions outside the US. Globally, EVs currently account for some 27% of all light vehicle sales, with that share closer to 60% in China.
UBS believes the current energy shock has shifted the balance for EVs and we are starting to see both anecdotal and quantitative evidence showing an upward shift in EV preferences.
EV sales are up 34%/40%/22% year on year, year to date, in March in Germany, France and the UK respectively though UBS notes sales in the US remain challenged.
At some 60% of global EV sales, Chinese EV demand remains key, and year to date performance is soft, UBS notes, down -18% year on year in March, reflecting reduced incentives and consumers waiting for new models.
But Chinese EV sales tend to be back-end weighted and UBS remains positive on a second half rebound. Prior to the Middle East conflict, UBS had assumed a two-year compound annual growth rate (CAGR) of 12%.
Looking further ahead, Macquarie reports the International Energy Agency has projected that EV sales would grow by around 10% this year.
More fundamentally, improving cost competitiveness, alongside tighter emissions and fuel economy standards, is expected to support robust EV sales growth over the next decade.
The IEA's current scenarios suggest global EV sales will more than double by 2035 (9%-10% CAGR), reaching around half of global car sales. If realised, this would lift the global EV fleet to over 450m by 2035 from around 75m today, representing more than one-quarter of all light vehicles in use.
The IEA estimates indicate EVs are currently displacing around -1.7m barrels per day of oil demand, rising to 910mbpd under its forecast scenarios.
Lithium
EV demand clearly plays into lithium demand. Lithium demand is also impacted by demand for Battery Energy Storage Systems (BESS).
UBS’ analysis suggests cost deflation is driving a sharp inflection point for energy storage.
The impact of geopolitical shocks, oil/gas price spikes and AI-driven surging data centre power requirements combine with a forecast -30% decline in BESS system cost, which results in higher global BESS demand (up 6% to 1.6 TWh by 2030) with larger upgrades to the US and Rest of World.
UBS has upgraded its lithium price view reflecting
(1) an increasingly positive BESS view,
(2) increased EV demand penetration due to the Middle East conflict, positively impacting EV versus ICE (internal combustion engine) total cost of ownership economics, and (3) accelerating e-Truck demand in China.
UBS has also updated supply forecasts, trimming this year on IGO Ltd’s ((IGO)) output guidance downgrade for Greenbushes (WA), but adding to the outer years in anticipation of a supply response to higher prices.
New, unknown brown/greenfield projects will increasingly be needed to meet projected deficits by 2030 and beyond. As a result, UBS increases its spodumene price forecasts by up to 23% nearer term, and 17% long term, reflecting inflation in capital and operating costs in key producing regions.
The key supply question is not if but when supply can catch up. UBS has learned from previous cycles new supply can ramp relatively quickly.
But what has UBS incrementally more positive this time around is
(a) demand growth is larger in absolute terms, and
(b) new supply is more challenged, given increased policy/geological/commercial hurdles.
From the first post-EV lithium cycle, in which demand was satisfied by Chilean brines and Greenbushes, last cycle we saw new supply emerge from China (eg lepidolites) and Africa.
Going forward, UBS models supply growth of circa 596kt from 2025-2027, versus 623kt demand.
Australia (circa 23% of supply growth) sees growth from Liontown Resources’ ((LTR)) Kathleen Valley, PLS Ltd’s ((PLS)) Pilgangoora and IGO’s Greenbushes (albeit recently trimmed).
China (circa 28% of supply growth) includes a large addition at Qinghai Salt Lake and restart of CATL’s Jianxiawo mine (44% of China supply from mid-2026).
In Africa, UBS is tracking growth in Mali and Zimbabwe.
UBS is watchful of supply surprising to the upside, especially from less opaque regions (eg Nigeria). But at the same time, the analysts see listed producers seeking confidence before committing to lift production (restarts or new) amidst heightened macro uncertainty, diesel and other input disruptions and elevated lithium price volatility.
In UBS’ opinion, these factors temper the likely pace of much of the potential supply response.
UBS has upgraded prices as much as 47% across spodumene, lithium carbonate and hydroxide reflecting an incrementally tighter forecast for the market.
The analysts also upgrade their long term spodumene price 17% to US$1,400/t highlighting the continued inflationary environment in relevant mining jurisdictions (Canada, Australia), though highlight considerable uncertainty longer term on who solves structural deficits beyond 2030.
UBS remains overweight the sector with preference for IGO, Liontown and Mineral Resources ((MIN)), while PMET Resources ((PMT)) remains a compelling option into the long-term thematic.
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