Why Macquarie still sees ‘material upside’ for ASX lithium shares

This top broker wasn’t deterred by last week’s lithium sell-off.

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Key points

  • ASX lithium shares were battered last week amid a bearish broker note, expectations demand could fall, and Argentina's new reference price
  • However, Macquarie is still predicting big things out of the sector
  • The broker believes the market overreacted to last week's news and noted some ASX lithium shares are factoring in realised spot prices around 80% lower than current prices 

Turbulent is a good word to describe how ASX lithium shares have been tracking over the last week.

Producers of the ‘white gold’ material – a necessity for the decarbonisation movement – tumbled last Wednesday.

But despite recent despair, Macquarie Group Ltd (ASX: MQG) Equities is still hopeful. There’s still a “material upside to lithium miners”, the broker said, courtesy of The Australian.

Let’s take a closer look at what the financial giant likes about ASX lithium shares following the sell-off.

Macquarie still backing ASX lithium shares

Today marks a week since ASX lithium shares spectacularly nosedived amid a bearish note out of Goldman Sachs, expectations a major Chinese electric vehicle (EV) manufacturer was taking its lithium needs into its own hands, and Argentina’s new reference price for lithium exports.

Liontown Resources Limited (ASX: LTR), Core Lithium Ltd (ASX: CXO), and Pilbara Minerals Ltd (ASX: PLS) were hardest hit. Their share prices plunged 18%, 20%, 22% respectively last Wednesday and haven’t fully rebounded yet.  

Other lithium shares Allkem Ltd (ASX: AKE), IGO Ltd (ASX: IGO), Mineral Resources Limited (ASX: MIN), and Sayona Mining Ltd (ASX: SYA) were similarly impacted. They slipped between 8% and 18% last Wednesday.

But the tumble isn’t the end of a green era for lithium shares, according to Macquarie.

It reportedly believes Argentina’s reference price of US$53,000 per tonne of lithium carbonate equivalent wasn’t a price cap. Instead, the broker understands it to be a way for the nation’s government to understand lithium prices and contract pricing

Meanwhile, Macquarie reportedly expects Chinese EV giant BYD’s proposed African lithium projects to face logistical challenges, slowing down their journey to production.

Finally, the broker reportedly said its favourite ASX lithium share – Pilbara Minerals – is factoring in realised lithium prices of approximately US$13,000 per tonne.

“This is 80% below current spot lithium carbonate prices in China”, Macquarie said, as quoted by Livewire. “[it’s also] equivalent to a flat spodumene … of US$950 [per tonne], 85% below the last BMX spot sale.”

Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. 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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