The sheer incline in lithium prices over the past year has left many investors with their jaws unhinged and on the floor. Shockingly, many industry experts suspect these remarkable prices will continue into the future.
Fattening the pockets of anyone in the lithium game, the commodity price has increased about 525% in the last 12 months. This has led to ASX lithium shares such as Pilbara Minerals Ltd (ASX: PLS) and Liontown Resources Limited (ASX: LTR) exploding 181% and 291% in value, respectively.
However, the all-important question is: can it stay this way? Well, based on the perspectives of certain mining veterans and analysts, the answer is a resounding — yes.
Let's take a closer look at the reasoning behind the hype.
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Fundamentals are on the right side of lithium prices
When searching for credible insights, nearly 32 years of industry experience doesn't go astray. That's how well-accustomed former Fortescue Metals Group Limited (ASX: FMG) exec and mining veteran, Greg Lilleyman, is to the commodity game.
Having served as chief operating officer at Fortescue, Lilleyman has shared in the success of booming industries — such as iron ore — in his time. Although, after leaving the $60 billion iron ore behemoth, Lilleyman has been salivating over a commodity of a different kind.
Joining the board of Global Lithium Resources Ltd (ASX: GL1) as a non-executive director, Lilleyman is banking on lithium prices to benefit from decarbonisation tailwinds. Global Lithium is another ASX-listed lithium name that has enjoyed astonishing returns of late. For context, the company's shares are up 435% in the past year.
Lilleyman expects the commodity commonly used in electric vehicle (EV) batteries will be a winner moving forward, stating:
Prices go up, prices go down. But I genuinely believe structurally the prices will remain solid in the spodumene and lithium space because the fundamentals say it should. There's nothing speculative about it.
Importantly, the veteran draws attention to a shortage of mines producing high-quality lithium. In addition, Lilleyman expects supply to be harder to source and more expensive due to environmental reasons and increased taxes. These factors combined could push lithium prices even further to the upside.
Analysts on the same page
Lilleyman is not alone in his assessment of the burgeoning lithium industry. Recently analysts from Citigroup and UBS have both shared a positive sentiment for future lithium prices.
Firstly, Citigroup outlined its expectations for an extreme lithium deficit in 2022. Additionally, the lack of lithium projects in the pipeline has led the analysts to raise their long-term price forecast by 36%.
Referencing an expected 10.7 million EV's to be sold in 2022, Citigroup analysts stated:
EV penetration is on an 'S-curve' and high lithium prices are here to stay.
Meanwhile, the team over at UBS is supportive of these forecasts. Adding that the investment bank believes climate-friendly government policy will squash internal combustion engine vehicle sales by 2040.
