The market is taking a tumble today, but some ASX lithium shares are bucking the trend after a top broker upgraded its outlook for the commodity.
The S&P/ASX 200 Index (ASX: XJO) fell 0.8%, with all sectors losing ground in late morning trade. A poor lead from Wall Street on Friday triggered the sell-off, although one group of shares are faring better.
These are ASX lithium miners, as the broker Macquarie lifted its price forecast for the battery-making mineral.
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Upgrades for ASX lithium shares
That's an unusual move given most analysts have been downgrading commodity prices. Iron ore and copper are some examples as worries of a sharp slowdown in economic growth, particularly in China, weigh on sentiment.
But the dour prediction doesn't extend to lithium, at least not from Macquarie's perspective. The broker noted that Chinese lithium carbonate prices continue to trade at material premiums to regional prices. This is great news for ASX lithium shares.
EV sales racing ahead
Macquarie said:
We upgrade medium-term lithium carbonate and hydroxide price outlook and expect prices to stay higher for longer. We also lift our regional lithium price forecasts to match the pricing strength in China.
The broker went on:
We continue to expect a price differential between regional prices and Chinese prices reflecting an approximate 3-month lag, which we expect to close in CY24.
The broker also pointed out that sales of electric vehicles (EVs) continue to grow strongly in 2022, despite rising battery prices. Global EV sales are up an estimated 57% year on year between January and July. Macquarie expects sales will hit 10 million vehicles this year, or just over 50% vs. last year.
Higher spodumene prices will benefit this ASX lithium share most
Macquarie also upgraded its short- and medium-term spodumene prices (another source of lithium). This is because it doesn't see new supply hitting the market until sometime next year.
As a result, its peak price assumption increases by 2% to US$5,000 a tonne (for the quarterly average price).
Importantly, Macquarie's spodumene price expectations for CY23 are pushed up to 55%. Prices for the next three years are upgraded by more than 100% in each year.
ASX lithium shares to buy now
The ASX lithium share that stands to gain the most from a stronger spodumene price is the Pilbara Minerals Ltd (ASX: PLS) share price.
This probably explains why the Pilbara Minerals share price jumped 2.95% to $3.14 at the time of writing.
Macquarie increased its 12-month price target on the miner by a whopping 40% to $5.60 a share.
Meanwhile, the Allkem Ltd (ASX: AKE) share price is outperforming the market with a 1.3% gain. Macquarie lifted its price target by 30% to $21 a pop. Allkem offers unique exposure to both lithium brine in South America and spodumene production in Australia.
The Mineral Resources Limited (ASX: MIN) share price also got a boost. The iron ore and lithium producer has gained 1.49% after Macquarie pushed its price target up by 12% to $95 a share.
