ASX lithium shares have been punished significantly in 2022 so far, despite a continuing solid environment for lithium pricing and expectations of strong demand.
In 2022 to date, the Pilbara Minerals Ltd (ASX: PLS) share price has fallen by almost 40%.
The Allkem Ltd (ASX: AKE) share price has dropped by 14% — not as much as others, but still double-digits.
The Liontown Resources Limited (ASX: LTR) share price has sunk by 46% in 2022, while the Mineral Resources Limited (ASX: MIN) share price has tumbled by 27%.
Some of those are big declines.
Don't forget, there are expectations of strong long-term demand for lithium, which could help ASX lithium shares. As Rio Tinto Limited (ASX: RIO) pointed out when it acquired Rincon mining:
The market fundamentals for battery grade lithium carbonate are strong, with lithium demand forecast to grow 25% to 35% per annum over the next decade with a significant supply demand deficit expected from the second half of this decade.
Recent lithium pricing remains strong
Pilbara Minerals likes to utilise the Battery Material Exchange (BMX) to sell some of its lithium.
Just two weeks ago, the company announced it had achieved another healthy price with its sixth scheduled digital auction – the accepted offer was a pre-auction bid.
It sold a shipment of 5,000dmt on a 5.5% lithia basis , with the offer being US$6,350 per dry metric tonne. Pilbara said it was "pleased" with the "strong" responses from bidding participants.
At the time, the incoming Pilbara Minerals managing director and CEO Dale Henderson said:
This is an exceptional outcome which provides further evidence of the unprecedented demand for battery raw materials being experienced across the global lithium-ion supply chain at this time.
Contrary to recent suggestions that the market has peaked, the evidence we are seeing at the coal-face with our customers, including the pricing outcome, suggests that demand remains incredibly strong, with a continued healthy outlook for the foreseeable future.
Broker price targets
With share prices down heavily, lithium prices remaining strong, and ongoing demand forecast, is this an attractive time to buy ASX lithium shares?
Macquarie rates the Pilbara Minerals share price as a buy, with a price target of $4.20, after the recent strong performance of cash flow and production. That implies a possible rise of more than 90% in the next 12 months on the current price of $2.17.
The broker rates Allkem as a buy, with a price target of $17. That implies a rise of close to 80% on the current price of $9.60, if the broker is correct.
Macquarie rates Liontown as a buy, with a price target of $1.85. That suggests a possible rise of more than 90% on the current 95 cents, after taking into account the recent deal announced with Ford.
