Why these ASX lithium shares are down for a 5th straight session?

Why are ASX lithium shares, Galaxy Resources Limited (ASX: GXY), Pilbara Minerals Ltd (ASX: PLS) and Orocobre Limited (ASX: ORE) selling off?

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ASX lithium heavyweights, Galaxy Resources Limited (ASX: GXY)Pilbara Minerals Ltd (ASX: PLS), and Orocobre Limited (ASX: ORE) marked a fifth straight session of losses on Monday.  

Galaxy and Orocobre have extended the losing streak on Tuesday. However, the Pilbara finally ticked green, bouncing 4.19% to $1.12 at the time of writing. 

Why ASX lithium shares are selling off 

Commodities take a breather 

The broader commodities sector experienced a sharp pullback between 11 to 14 May. During this time, the S&P/ASX200 Materials (INDEXASX: XMJ) index fell 4.80%. Main laggards included heavyweights BHP Group Ltd (ASX: BHP) and also Fortescue Metals Group Ltd (ASX: FMG)

The weakness across the commodities sector likely dragged ASX lithium shares lower or capping any potential upside. 

Weakness in lithium-related industries 

The Global X Lithium & Battery Tech ETF (NYSEARCA: LIT) is made up of companies involved in the lithium cycle, from mining and refining the material to battery and electric vehicle production. 

The exchange traded fund‘s (ETF) largest positions include Albemarle, the world’s largest provider of lithium for electric vehicle batteries and Ganfeng Lithium, the worlds third largest diversified lithium player. In addition, Contemporary Amperex Technology, a Chinese battery manufacturer. 

After surging as high as US$74.80 by mid-February 2021 from a pre-COVID high of ~US$33, the ETF experienced a sharp 25% selloff. This has brought it back down to the US$50 level. The lithium ETF is currently down approximately 2% year-to-date.

The flat year-to-date performance and recent selloff of the ETF reflects weakness across the lithium. This comes all the way down the supply chain from miners through to battery producers. The weak sentiment could be a factor weighting on ASX lithium shares. 

The bigger picture 

While the share price of ASX lithium shares might be taking a breather, the lithium landscape continues to make headway.

Lithium spot prices are still running hot in 2021. Furthermore, the latest update from Fastmarkets highlights an uptick in both lithium carbonate and hydroxide prices in Asian markets due to tight supply availability. 

Pilbara’s corporate presentation on 11 May highlights the continued tailwinds including the global commitment to achieve carbon neutrality and strong electric vehicles sales in both China and Europe.

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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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