What these 2 best performing ASX shares have in common….and what to expect next

In the early 20th century fortunes were made on oil as petrol cars hit the roads. Now the world is seeking new forms of energy.

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ASX lithium shares record A line-up of green lithium batteries, indicating positive share price movement for clean ASX lithium miners

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Yesterday I penned an article detailing the 5-best performing ASX shares of the 2021 financial year (FY21). (You can find that here.)

To avoid the potential distortions from the high volatility often experienced with microcap stocks, I limited the scope to ASX shares trading on the All Ordinaries Index (ASX: XAO). The All Ords contains the 500 largest companies by market cap.

For reference, the All Ords gained 25% in FY21, which ran from 1 July 2020 through to 30 June 2021.

What these 2 best ASX shares have in common

Today I’d like to draw your attention back to 2 of those ASX shares. Namely Vulcan Energy Resources Ltd (ASX: VUL) and Piedmont Lithium Inc (ASX: PLL).

Over the course of FY21, Vulcan Energy saw its share price fly 1,275% higher. That made Vulcan Energy the number 1 best performing ASX share on the All Ords.

Piedmont Lithium, the fourth best ASX share to own during the financial year gone by, soared 1,033%.

And remember, the benchmark we’re holding them up to gained ‘only’ 25% over that same time.

So, what do both of these ASX shares have in common?

The answer lies in Piedmont’s name.

Yep, lithium.

Vulcan Energy is working to become a major supplier of lithium to power the booming European electric vehicle (EV) markets. Already a growth market, the European Union has just signalled its intent to ban new combustion engine vehicles by 2035, meaning EVs are likely to dominate.

Piedmont Lithium is more focused on the huge opportunities presented by the United States’ changing energy needs. Both with EVs and grid storage batteries. Piedmont’s Carolina Lithium project is forecast to become one of the biggest, lowest-cost producers of lithium hydroxide in the world.

That’s the year gone by.

But what next for ASX lithium shares?

What next for lithium shares?

With the world increasingly intent on decarbonising our energy sources, analysts are broadly bullish on the outlook for lithium prices. And higher prices will offer a healthy tailwind for ASX shares involved in exploring for and producing lithium.

For example, Credit Suisse research analyst Matthew Hope said (quoted by the Australian Financial Review):

Lithium prices have risen sharply since February and we do not believe it is temporary. The lithium supply glut has ended and the market is now tightening as the electric vehicle revolution accelerates, [meaning] supply will need to stretch to meet demand…

The mines and salt lakes currently producing, together with those under construction, and idle operations that can be restarted, are insufficient to meet demand and will see growing deficits.

James Stewart, co-portfolio manager of Ausbil’s global resources fund, is also bullish on lithium prices:

What was a concept story a few years ago, is all of a sudden real now. Over the next six to 12 months, in particular, we can’t see significant lithium volume coming online to meet the phenomenal demand for electric vehicles we’re seeing across Europe, China and the US.

This should come as welcome news to ASX shares working on recycling and digging up lithium.

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The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended Piedmont Lithium Inc. 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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