The lithium industry has been running cold in 2022 after being the hottest part of the market in 2021.
Concerns over a potential sharp decline in the price of the battery making ingredient in the near future have been weighing heavily on sentiment.
This is because there are many developers and explorers on the Australian share market that could miss out on the sky-high prices of today and eventually commence operations when prices are much lower. This would have a significant impact on their profitability.
And as the market is a forward-looking machine, these lower future profits impact the valuation of a company today.
Luckily, some ASX lithium shares are already producing the white metal and are benefiting from record-breaking prices.
Which lithium shares are already producing?
Allkem Ltd (ASX: AKE), Mineral Resources Limited (ASX: MIN), and Pilbara Minerals Ltd (ASX: PLS) are already producing lithium and have plans to grow their output in the future.
For example, Allkem is planning to increase its lithium production three-fold by 2026 and maintain a 10% share of the global lithium market over the next decade.
Whereas Mineral Resources recently agreed to accelerate the resumption of production from Train 2 at Wodgina. The first spodumene concentrate from this train is expected in July with a nameplate capacity of 250,000 dry metric tonnes.
What about the rest?
There are a number of developers and explorers on the ASX, which are still a little way off producing lithium.
- Liontown Resources Limited (ASX: LTR) is targeting first lithium concentrate production in 2024.
- Piedmont Lithium Inc (ASX: PLL) is aiming for the first half of 2023.
- Sayona Mining Ltd (ASX: SYA) is targeting production during the first quarter of 2023.
- Vulcan Energy Resources Ltd (ASX: VUL) is planning to construct its first commercial plant in 2024.
Finally, the next ASX lithium shares that are likely to be producing are Argosy Minerals Limited (ASX: AGY) and Core Lithium Ltd (ASX: CXO). The latter proudly labels itself as "Australia's next lithium producer." It is targeting production at the Finniss Project by the end of 2022, whereas Argosy is aiming for production from its Argentinian operation during the third quarter of the calendar year.
What should investors do before investing in lithium?
Valuations arguably got out of control last year with investors valuing companies as if lithium prices would stay at record levels forever. So, just because a share is down 50% from its high doesn't necessarily mean it is a bargain now.
If you're looking to invest in lithium explorers, you might want to consider just how profitable (or not) they will be if battery material prices do tumble as predicted by analysts.
