Could the Core Lithium share price be set to take off again in June?

It seems it may not be all gloom and doom for this ASX lithium share.

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Key points

  • The Core Lithium share price could face better times this month after the company was included in the S&P/ASX 200 Index
  • Reassurances from some experts about the demand and price outlook for lithium should also help turn sentiment
  • While the ASX miner has lost close to 30% since hitting a record in April, its shares have increased four-fold over the past year

The Core Lithium Ltd (ASX: CXO) share price may be on the back foot this morning but there are hopes that this month will be a good one for the ASX miner.

The signs are looking a little more promising after the recent big fall in the company’s shares. Not only have some experts come out to reassure the market on the outlook of the sector, but the Core Lithium share price has just been added to the S&P/ASX 200 Index (ASX: XJO).

The news isn’t helping the Core Lithium share price this morning though. At the time of writing, it’s slipped 2.88% to $1.18.

Core Lithium share price could find near-term support

History has shown that ASX shares added to a major index tend to outperform in the months following their inclusion.

Meanwhile, reassurances from experts about lithium demand and prices have helped the Core Lithium share price rebound around 7% this month, although it’s still down 27% from its 4 April 2022 peak of $1.60.

Demand and prices moving in favour of Core Lithium’s share price

Sentiment towards the sector appears to have improved. A number of analysts and industry insiders have rebuffed last week’s warning from Goldman Sachs that lithium prices have peaked for now and will decline sharply.

The incoming chief executive of Pilbara Minerals Ltd (ASX: PLS), Dale Henderson, said Goldman is wrong. He pointed to strong ongoing demand from customers and high prices achieved at recent auctions for the metal to refute the bearish outlook.

While that’s probably what you might expect the CEO of a lithium miner to say, other brokers are decidedly more upbeat on the commodity.

Big upside for ASX lithium shares

For instance, the analysts at Macquarie Group Ltd (ASX: MQG) are supporters of the sector. They don’t cover Core Lithium, but they rate all other ASX lithium-exposed miners in their coverage universe as “outperform”.

The broker even went as far as to say it sees “material valuation upside” for the ASX lithium shares it covers.

Supply response could be slower than you’d think

One reason for the broker’s upbeat outlook relates to its view on the risks of increased supply of the commodity. As the saying goes for commodities – nothing cures high prices like high prices.

The surge in lithium prices should see more producers entering the market, but Macquarie thinks this is easier said than done.

For instance, Chinese lepidolite suppliers could struggle to add much new supply. Lepidolite is more complex to process and new extraction technologies are controlled by four major producers.

Meanwhile, added supply from Africa could take longer to bring online than the market is anticipating, added Macquarie.

Despite today’s dip, the Core Lithium share price has gained around 350% in the past year.

Motley Fool contributor Brendon Lau has positions in Macquarie Group Limited. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Macquarie Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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