Meanwhile, Goldman is anticipating robust global supply growth this year, with Australia and Chile adding 173,000 tonnes of lithium carbonate equivalent (LCE) to the market, and China 75,000 tonnes.
The broker subsequently slashed its average 2023 lithium carbonate price forecast by 44 per cent to $US30,011 a tonne.
Barrenjoey also downgraded its price forecasts this week after acknowledging that the lithium market was weaker than it expected due to slower EV sales growth and the seasonal increase in supply.
While the broker expects the lithium market to be largely balanced this year and next year, it warned that a surplus could emerge in 2025 as Liontown’s Kathleen Valley project and Leo Lithium’s Goulamina operations ramp up.
“This underpins the case for prices to moderate to the top end of the cost curve in 2023 and 2024,” said Glyn Lawco*ck, head of mining research at Barrenjoey.
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Barrenjoey cut its 2023 spodumene price forecasts 43 per cent to $US3966 a tonne, significantly below consensus estimates of $US5729 a tonne. The broker halved its 2024 projection to $US2500 a tonne, compared to consensus expectations of $US3938 a tonne.
Despite the cuts to its near-term forecasts, Barrenjoey raised its long-term projections to reflect the higher prices needed to incentivise the next wave of lithium production.
Not enough projects
Research by Barrenjoey, which assumes all probable and possible projects are funded, built, commissioned and ramped up, still shows a significant deficit in the lithium market from 2027 onwards.
“We continue to believe there are not enough identified and advanced projects to meet the projected expansion in market size by 2030,” Mr Lawco*ck said.
Barrenjoey subsequently lifted its long-term spodumene forecast by 36 per cent to $US1500 a tonne.
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The broker said that in time, it expected lithium prices to remain well above the cost curve and what the market believed to be the incentive price as demand outpaced supply for “years to come”.
Among the large-cap producers, Barrenjoey prefers Mineral Resources given its diversified nature and exposure to iron ore. The broker believes Pilbara Minerals and Allkem offer the greatest leverage to any bounce in lithium prices.
Leo Lithium is Barrenjoey’s preferred emerging producer, with the broker reiterating its “overweight” rating on the stock.
Macquarie said this week it remained constructive on the lithium market outlook despite near-term headwinds from higher inventories and slow EV sales.
The broker emphasised that price realisation would be a near-term focus given the volatile market and the battery material’s opaque pricing system.
“Realised lithium prices could be higher than the recent headline China LCE prices given miners have adopted different price mechanisms with its offtake partners,” Macquarie analysts said.
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Similar to Barrenjoey, Macquarie has lowered its short-term price forecasts but upgraded its long-term outlook, underpinned by higher operating and development costs.
Mineral Resources and Pilbara Minerals are the broker’s preferred producers, with Patriot Battery Metals and Global Lithium Resources its key picks among the explorers.
