ASX lithium shares on watch as lithium prices eye 2-year high

Brokers are upbeat for ASX lithium shares which are poised to benefit from higher lithium prices and increased electric vehicle demand

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ASX lithium shares, Galaxy Resources Limited (ASX: GXY), Pilbara Minerals Ltd (ASX: PLS) and Orocobre Limited (ASX: ORE) have taken a breather in recent weeks after posting triple-digit returns in 2020. 

Despite ASX lithium shares not posting significant gains this year, lithium prices have been quietly grinding higher and are eyeing 2-year highs. 

Higher lithium prices to support ASX lithium miners

Fastmarkets provides the latest battery-grade spot lithium prices across China, Europe and the US. The latest update from Fastmarkets highlights: 

  • Battery-grade lithium carbonate price in China continued to post slight gains while battery-grade hydroxide paused following the sharp rally in the prior pricing session.
  • The battery-grade lithium carbonate price in the seaborne Asian market continued the uptrend, while the equivalent grade hydroxide price kept firm.
  • European and United States' battery prices were firm on support from supply tightness and a good level of demand.

From a pricing perspective, battery-grade lithium carbonate in China has surged to 87,500 yuan (~A$17,340) per tonne, up from November lows of 40,000 yuan (~A$8,000). 

What do brokers think about ASX lithium shares? 

Citi and Credit Suisse are neutral on the Pilbara share price with a respective $1.10 and $0.95 target price. On 17 February, Citi noted that the electric vehicle (EV) market had proven extremely resilient in 2020 despite passenger vehicles weakness. The continued growth and demand for EVs will call for increased demand from materials in the EV battery supply chain. 

UBS is bullish on the Galaxy share price with a $3.60 target price and buy rating on 10 March. The broker eyes its James Bay lithium mine project, which is expected to have a mine life of 18 years based on an average production rate of 330,000tpa. 

Conversely, Morgan Stanley remained underweight for Galaxy shares. It noted that the James Bay lithium project would need to integrate with a lithium chemical producer. The key step once the project moves into production will be finding a downstream conversion partner. The broker retained its $1.50 price target.  

UBS is also buy-rated on the Orocobre share price with a $6.70 target price on 5 March. The broker points to Orocobre's significant improvement in cost base from US$4,266/t last year to US$3,623/t in December 2020. 

Motley Fool contributor Kerry Sun has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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