What’s going on with ASX lithium shares today?

ASX lithium shares are in the red today.

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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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After an extraordinary past few months, ASX lithium shares have opened to a sea of red on Friday.

The largest ASX-listed lithium player, Pilbara Minerals Ltd (ASX: PLS) is currently down 5.61% to $2.02. After a record open of $2.45 on 11 August, Pilbara shares have since tumbled 17.5%.

Similarly, established producers such as Orocobre Limited (ASX: ORE) and Mineral Resources Limited (ASX: MIN) are also selling off, down 4.03% and 2.90% respectively.

ASX lithium explorers are also red across the board, with names such as Piedmont Lithium Inc (ASX: PLL), Lake Resources N.L. (ASX: LKE) and Charger Metals NL (ASX: CHR) down 3.5%, 5% and 10% respectively.

Why are ASX lithium shares selling off?

ASX lithium shares have surged in recent months following a strong recovery in lithium spot prices and hype around increased electric vehicle adoption and renewable technologies.

However, according to The Motley Fool US, a report from Bank of America flagged underperform ratings for two of the biggest names in the lithium mining industry, Albemarle and Livent.

“The bank said both stocks are benefiting from “significant hype” regarding long-term demand for lithium metal, but according to the analyst, they may not be able to deliver on that hype.”

“The bank warns that lithium carbonate prices are starting to plateau as demand fades for batteries to power laptops for the work-from-home market and power tools.”

There were also concerns that as producers ramp up production, the lithium market could once again be faced with a surplus.

“Such a rapid increase in lithium supply threatens to overwhelm even rising lithium demand, and depress the stock prices of Albemarle and Livent”

Resources sector under pressure

The broader S&P/ASX Materials (INDEXASX: XMJ) index has tumbled 9.55% in the past 5 days, driven by steep losses from iron ore giants BHP Group Ltd (ASX: BHP) and Rio Tinto Limited (ASX: RIO).

Metals markets have tumbled in recent days, headlined by iron ore and copper sinking to a respective eight and six month low.

The weak performance of the resources sector and spot prices could be another aspect weighing on the sentiment of ASX lithium shares.

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Motley Fool contributor Kerry Sun has no position in any of the stocks mentioned. 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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