While commodities have been strong in 2022, few have been as strong as lithium.
Thanks to seemingly insatiable demand in the electric vehicle market and tight supply, prices of the white metal have surged higher.
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Lithium prices continue to rise
The good news for current miners of the battery making ingredient is that lithium prices are expected to remain strong during the current quarter.
For example, Allkem Ltd (ASX: AKE) recently advised that it expects to command spodumene concentrate prices of US$5,000 per dry metric tonne and lithium carbonate prices of US$35,000 per tonne during the June quarter.
This is up from US$2,178 per dry metric tonne and US$27,236 per tonne, respectively, during the March quarter.
Furthermore, to show how far lithium prices have come, the release highlights that Allkem was commanding US$796 per dry metric tonne for spodumene concentrate in the September quarter and US$5,853 per tonne for its lithium carbonate during the March 2021 quarter.
Clearly, these are boom times for Allkem and other producers such as Mineral Resources Limited (ASX: MIN) and Pilbara Minerals Ltd (ASX: PLS).
But what about the many lithium developers and explorers on the ASX boards?
Where are lithium prices going?
Commodity prices have a tendency to move in cycles. At the current moment, prices appear to be nearing the top of the cycle thanks to the aforementioned strong demand and tight supply.
However, high prices attract more supply and eventually when that supply floods into the market and satisfies demand, prices will start to fall.
So, what should shareholders of future lithium miners AVZ Minerals Ltd (ASX: AVZ), Core Lithium Ltd (ASX: CXO), Lake Resources N.L. (ASX: LKE), Liontown Resources Limited (ASX: LTR), and Vulcan Energy Resources Ltd (ASX: VUL) be expecting?
Lithium carbonate
According to a recent note out of Goldman Sachs, its analysts are expecting lithium carbonate prices to average US$46,640 per tonne in 2022. However, from 2023 onward it is expecting a sizeable decline.
The broker's commodities team expects lithium carbonate prices to fall to:
- US$20,500 per tonne in 2023
- US$17,180 per tonne in 2024
- US$14,468 per tonne in 2025.
- Long run average of US$11,500 per tonne
What about spodumene concentrate?
It is a similar story for spodumene concentrate (6% li2O), with Goldman expecting an average of US$3,679 per tonne in 2022 before a sizeable pullback thereafter.
It is forecasting spodumene concentrate prices to be:
- US$1,750 per tonne in 2023
- US$950 per tonne in 2024
- US$900 per tonne in 2025
- Long run average of US$800 per tonne
In light of this, it would be worth considering just how profitable (or not) some lithium explorers and developers will be once prices normalise again.
