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Up 38% in July! Is the Orocobre share price a buy?

ASX lithium shares. It’s been some time since the Orocobre Limited (ASX: ORE) share price was all the hype, even as far back as 2018.

What’s been happening to ASX lithium shares?

The March bear market hit ASX lithium shares like Orocobre particularly hard. However, their share price recovery has lagged that of the S&P/ASX 200 Index (ASX: XJO).

The Orocobre share price hit a new, 52-week low of $1.82 per share on 14 May. Meanwhile, the Galaxy Resources Limited (ASX: GXY) share price hit a 52-week low back in mid-March.

For starters, global lithium prices have been volatile and trending lower for years.

That price decline has been both supply and demand-driven. A Fastmarkets report back in February laid out some of the challenges and opportunities on both sides.

On the one hand, there is a significant oversupply in the market right now. Demand has lagged supply for some time now with an expected uptick in electric vehicle production failing to materialise.

That has seen the Orocobre share price slide 55.9% lower since January 2018.

Falling demand for imported battery raw materials into China has also challenged commodity and share prices.

Over time, the hype around ASX lithium shares has died down. While some investors are still bullish, I think many are starting to lose faith in the long-term growth story.

Is the Orocobre share price worth buying at $3.19?

According to Geoscience Australia, Australia controls 18% of the world’s known lithium supply. That means Orocobre and Galaxy are well-placed to capitalise if the market booms.

I really think buying ASX lithium shares right now is pretty speculative.

Pilbara Minerals Ltd (ASX: PLS) expects the lithium market to triple in the next five years. Once again, it’s electric vehicles that are expected to be the main catalyst.

That would be good news for the Orocobre share price given the company’s status as a major lithium producer. However, it could also be a case of the Boy Who Cried Wolf as investors turn their backs on the potential upside.

I think I’d personally like to see Orocobre’s August full-year result before buying. I have no doubt that there will be potential winners among ASX lithium shares in the future.

The real trouble is picking a long-term winner and I wouldn’t bet on the Orocobre share price at $3.19.

Foolish takeaway

As you can see, picking winning ASX lithium shares is a challenging business. The Orocobre share price surged 3.2% higher yesterday but I think it’ll remain volatile rather than climbing higher in 2020.

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Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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