Why is the Lake Resources share price plunging 6%?

Let’s dive in and find out.

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Key points

  • The Lake Resources share price just dumped 8% before pulling back 
  • A Credit Suisse analyst warned that the lithium market may return to balance 
  • Global lithium shares including Lithium Americas also tumbled overnight 

The share price of ASX lithium miner Lake Resources N.L. (ASX: LKE) is slumping today.

The Lake Resources share price is currently trading at $1.36, a 6.21% fall. However, in earlier trade, the Lake Resources share price plunged 8% before pulling back. For perspective, the S&P/ASX 200 Index (ASX: XJO) is sliding 0.90% at the time of writing.

So why is the Lake Resources share price struggling today?

More lithium mines in production?

Lake Resources is not the only ASX lithium share having a tough day. The Core Lithium Ltd (ASX: CXO) share price is descending 5.16%, while the Allkem Ltd (ASX: AKE) share price is sliding 2.15%. Meanwhile, the Liontown Resources Limited (ASX: LTR) share price is descending 3.77% and the Mineral Resources Limited share price (ASX: MIN) is 3.01% in the red.

The fall comes after Credit Suisse analysts further weighed in on the lithium price outlook. Head of energy resources research Saul Kavonic warned of a balanced lithium market, in comments to the ABC. Credit Suisse is tipping lithium prices to halve to $US2,500 a tonne, the publication reported. Kavonic added:

We actually might see the market return to balance or even a surplus over the next 18 months. That was a situation we thought was unfathomable only a few months ago.

The analyst also noted there are now more lithium mines in production. This could increase supply. Kavonic said:

We’ve seen a lot of new mines being brought into production, incentivised by the high prices

Goldman Sachs also recently forecast a sharp correction in lithium prices last week, sending ASX lithium shares plunging last Wednesday.

However, not every broker agrees. Analysts at Macquarie have a more optimistic outlook for lithium, predicting a “material valuation upside” on the ASX lithium shares it covers.

Lake Resources was added to the ASX 200 index early this week as part of the June 2022 quarterly rebalance.

Meanwhile, a similar trend in lithium prices was seen in the United States overnight. Lithium giant Lithium Americas Corp‘s (NYSE: LAC) shares fell 4.45% in US markets, while Livent Corp (NYSE: LTHM) shares slid 3.16%. Meanwhile, Piedmont Lithium (NASDAQ: PLL) shares dropped 3%.

Lake Resources share price snapshot

The Lake Resources share price has exploded 413% in the past year and 35% year to date. However, in the past month, it has descended 18%.

For perspective, the benchmark ASX 200 has lost nearly 3% in a year.

Lake Resources has a market capitalisation of about $1.83 billion based on its current share price.

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 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 Scott Phillips.

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