A peek into Lithium stocks’ performance amid an ongoing tug of war related to future lithium prices

Key Highlights:

• Most ASX-listed lithium stocks experienced a drop in their share price following the lithium price projection by Goldman.
• The lithium-ion battery is an advanced battery technology that uses lithium ions as a key element of electrochemistry and is used in various electronic products, electric vehicles, etc.
• Goldman expects a sharp correction in the lithium prices, with lithium prices averaging under US$54,000 per ton in 2022, down from the spot price of more than US$60,000.
• In 2023, lithium prices would go down to an average of more than US$16,000.

Lithium is an essential component used in the electric vehicle.  Because of the rising concerns about global warming, the demand for this silver-white metal has increased significantly.

 A lithium-ion battery is an advanced battery technology that uses lithium ions as a key element of electrochemistry.  Compared to other high-quality rechargeable batteries, lithium-ion batteries have several advantages.  These batteries are amongst the highest energy densities of any battery technology today.  Further, they can deliver up to 3.6 Volts and three times more than technologies like Ni-Cd or Ni-MH.  It means that lithium-ion batteries have the potential to deliver huge current for high-power application and have low maintenance, and does not require scheduled cycling to maintain battery life.  Besides these features, lithium-ion batteries have other benefits, like they have no memory effect.  Also, they do not contain toxic cadmium, which makes them disposable and environmentally friendly.

Because of these features lithium has attracted many players from the automobile space.  As a result, lithium-producing companies have significantly gained huge market attention since the previous year.

However, many players noted a drop in its share price post Goldman Sachs Group Inc pointed out that the price of three major battery metals- cobalt, lithium, and nickel will decrease over the coming two years after investors wanting exposure to green-energy transition piled in too quickly.

As pointed out by Goldman’s analysts, the long-term prospect of lithium is strong due to the rapid adoption of the electric vehicle.  Investors’ excitement has resulted in an oversupply.  Based on their analysis, Goldman highlighted that there would be a sharp correction in the lithium prices, with lithium prices averaging under US$54,000 per ton in 2022, down from the spot price of more than US$60,000.  It would go down further to an average of more than US$16,000 in 2023.

Later this announcement, now Credit Suisse also expects a pullback in lithium prices in 2023.  However, many experts are still optimistic that the price of lithium will move up because of the rise in the demand for lithium batteries.

Post Goldman’s projection, ASX players like Pilbara Minerals (ASX: PLS), Liontown Resources (ASX: LTR), and Alkem (ASX: AKE) noted a drop in their share prices.  However, many players showed improvement in their share prices.

On that note, and considering the ongoing tug of war related to the lithium price projection, let us see some ASX-listed players from this space and see the impact of these projections on their prices.               

As per the above chart, we can see a significant drop in the share prices of these lithium players in the last two days.  Most of these players have delivered strong return in the previous 1 year.  However, some players have improved their share price on 02 June 2022 amid the ongoing discussion related to the lithium prices.

Bottom Line:

As a result of the ongoing discussion related to the lithium prices outlook, a significant drop was seen across several players on ASX.  At this point, it would be difficult for us to comment on the version of different experts in the market as they have their understanding to justify the future prices of lithium.

While some experts believe that the lithium metal bull market is over, some experts are still optimistic about the future prices of lithium.

There are also reports in the public domain highlighting that this metal is scarce and the demand is too high.

Amid these discussions, it would be interesting to watch how these lithium players perform in the coming period.

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