ASX lithium shares are the soup du jour with investors and the sector just got a big upgrade from a top broker.
The analysts at Macquarie Group Ltd (ASX: MQG) upgraded their lithium price forecasts by between 30% and 100% for the next four years after they reassessed the outlook for the commodity.
Their very bullish take on the critical battery ingredient is predicated on the belief that global supply will fall short of demand.
Lithium supply shortfall looming large
“Our bullish EV [electric vehicle] demand outlook sees the lithium market move to deficit in 2022 with material shortages emerging from 2025,” said Macquarie.
“The rise in China spot prices has started to translate through to a recovery in regional lithium prices.
“Despite the strong recovery, we note that all regional prices are still down from the beginning of 2020, except for spodumene and Asia lithium carbonate prices.”
The broker believes this signals further upside to regional prices in the coming months.
ASX lithium shares upgraded to “buy”
Significantly for ASX investors, the upward revision in the lithium forecast prompted Macquarie to upgrade its recommendation on some ASX shares.
The Orocobre Limited (ASX: ORE) share price is one beneficiary as the broker upped its rating on the ASX miner to “outperform”.
Second tailwind for the Orocobre share price
Coincidentally, Orocobre issued an upgrade of its own today too. Management said that the sales price for its lithium carbonate jumped 50% to US$5,853 a tonne in the March quarter compared to the previous quarter.
“Orocobre also advises that prices for the June 2021 quarter are expected to be approximately US$7,400/tonne FOB, subject to shipping schedules,” said the miner.
“This pricing will be the highest pricing received since June 2019 and is expected to result in H2FY21 pricing being approximately 20% higher than prior guidance.”
The Orocobre share price jumped 3.5% to $5.66 in morning trade.
Other ASX lithium shares for your buy list
Another ASX miner that got upgraded to “outperform” by Macquarie is the Galaxy Resources Limited (ASX: GXY) share price.
“GXY’s earnings outlook has been transformed by the material upgrades to our lithium and spodumene pricing outlook,” added Macquarie.
“Our earnings estimates have more than doubled over the next five years, with the increased cash flow reducing debt funding requirements.”
The third lithium miner on Macquarie’s buy list is the Pilbara Minerals Ltd (ASX: PLS) share price. It too got a big earnings boost from the lithium price revision.
Macquarie’s 12-month price target on the Orocobre share price is $7.10 a share. It’s target prices for the Galaxy share price and Pilbara Minerals share price are $4.20 and $1.30, respectively.
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The Motley Fool Australia owns shares of and has recommended Macquarie Group Limited. 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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