Why has the Allkem share price tumbled 30% from its May all-time high?

The lithium giant’s shares have fallen from grace in recent times.

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Image source: Getty Images

Key points

  • Allkem shares have been hit hard over the past three weeks, declining 30%
  • The Allkem share price started falling when Goldman Sachs put out its bearish report on the lithium sector at the end of May
  • The broker is predicting a sharp correction in lithium prices in the following year

The Allkem Ltd (ASX: AKE) share price has been under severe selling pressure since the end of May.

After reaching an all-time high of $14.38 on 30 May, the lithium mining company’s shares are now fetching $10.15. This represents a fall of almost 30% in just three weeks.

Let’s take a look at what has happened recently with Allkem.

Allkem shares momentarily power off

Despite the company releasing a positive update earlier this month, investors have continued to offload Allkem shares.

On 6 June, the company announced strong conditions in the battery metals market, leading to increased lithium carbonate and spodumene concentrate prices.

However, negative sentiment across the industry brought on by a weakened near-term outlook for lithium has weighed down the Allkem share price.

For context, shares in peers Lake Resources N.L(ASX: LKE) and Core Lithium Ltd (ASX: CXO) have also declined. They are down 39% and 17% in the past week, respectively.

This follows the release of Goldman Sachs’ bearish analysis on the lithium sector which saw investors head for the exits.

The broker noted that fundamental mispricing has generated an outsized supply response well ahead of demand.

Because of this, Goldman Sachs forecasts a lithium price correction to as low as US$16,000 per tonne in 2023.

Currently, the going rate for lithium carbonate per tonne is around US$71,400.

When the report came out on 1 June, Allkem shares tanked 15% on the day.

And since then, its shares have recorded just four days in the green out of the last 14 trading days.

While the industry pushed back after Goldman Sachs’ report, no one knows exactly where the price of lithium will be next year.

Allkem share price snapshot

Despite coming off a horrid run, the Allkem share price has surged by 70% over the past 12 months.

However, looking at year to date, the company’s shares are relatively flat for the period, down around 2%.

Allkem commands a market capitalisation of approximately $6.25 billion.

Motley Fool contributor Aaron Teboneras 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 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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