Why are ASX 200 lithium shares falling so hard today? (2024)

FAQs

Why is lithium asx falling? ›

In 2023, a rush of investment in lithium production followed the high prices of 2022, driving a significant global supply surge. However, weaker-than-expected demand for electric vehicles in the US and Europe balanced the market and sharply lowered prices.

Over the past year, lithium prices experienced a significant decline of around 80%, mainly attributed to weakening demand for electric vehicles (EVs). Just in January, lithium prices dropped to their lowest point since August 2021, exacerbating the challenges faced by lithium producers.

The current decline in lithium prices can be primarily attributed to the slowing growth of electric vehicle sales in China. This is coupled with the broader slowdown in the Chinese economy. As demand remains sluggish at previous pricing levels and supply surpasses demand, prices have inevitably fallen.

Given that the lithium and EV markets have matured over the past five years, sector companies have a better grip on their finances and operations, and global governments are also solidly in the EV business, it's reasonable to assume a big rebound is on the way. That should give LIT a big boost.

The one lithium miner that Goldman is recommending as a buy despite its bleak view for the battery making ingredient is IGO Ltd (ASX: IGO). It has a buy rating and $7.50 price target on IGO's shares. Goldman likes IGO due to its low cost Greenbushes operation, which remains profitable in the current environment.

Lithium prices remained subdued in the first quarter of 2024, well below highs set in late 2022 and 2023. Various factors, including oversupply and weak electric vehicle (EV) demand, kept prices muted over the 90 day period.

Prices have bottomed out but have struggled to meaningfully rebound, partly because miners, refiners and carmakers are still working through a mound of surplus stock clogging up the supply chain.

Lithium Americas (Argentina) is a smaller challenger to Albermarle with less of a track record, having been spun out from Lithium Americas (LAC). But Goldstein says the stock remains the most undervalued lithium producer under our coverage.

While analysts such as Canaccord Genuity have suggested the lithium price has already bottomed out, there might be more to the picture. The lithium outlook was closely analysed at the Tribeca Future Facing Commodities Conference this week.

However, the long-term outlook of lithium stocks remains strong due to the strong uptick in demand for electric vehicles. As a result, experts are forecasting that lithium carbonate prices might stabilize between $20,000 and $25,000 per metric ton from 2024 to 2027.

What is the best lithium stock to buy? ›

That said, ALB remains the largest and perhaps the most prominent option for lithium investors as it boasts the biggest market value of any publicly traded stock in the U.S. with a focus on this battery metal. It is also worth noting that Albemarle is one of the top holdings in several top lithium funds.

Over a 5-year period, lithium prices have reached their lowest level since August 2021. For the year, lithium price went down 66.77% amid subdued EV demand, leaving behind undervalued lithium stocks.

At the end of 2021, Tesla inked a fresh three year lithium supply deal with top lithium producer Ganfeng Lithium (OTC Pink:GNENF,SZSE:002460). The Chinese company will provide products to Tesla for three years starting in 2022.

Some of the top ASX lithium stocks to consider include Pilbara Minerals, Core Lithium, and Lake Resources. These companies benefit from stable lithium commodity prices and strategic locations in the lithium triangle and northern territory, key areas for lithium production.

U.S. geological survey the world is getting better at mining battery metals including lithium. As of 2021, it was estimated that the world had 88 million tonnes of lithium resources.

As we suspected, our examination of Pilbara Minerals' analyst forecasts revealed that its outlook for shrinking earnings is contributing to its low P/E. At this stage investors feel the potential for an improvement in earnings isn't great enough to justify a higher P/E ratio.

Finally lithium prices bottomed, led by a 40%-odd rally in lithium carbonate. This triggered a new bout of speculative bottom fishing and short covering in ASX lithium stocks. Judging by social media chatter, we'd turned the corner.

If investing is about pouncing at the point of maximum pessimism, lithium stocks must be worth a fresh look. The metal used to make electric-vehicle batteries has given investors whiplash. Prices rose rapidly in 2021 and 2022 before falling even faster in 2023.

Based on 8 Wall Street analysts offering 12 month price targets for Lithium Americas Corp. in the last 3 months. The average price target is $8.57 with a high forecast of $15.00 and a low forecast of $6.00.