Why are ASX 200 lithium stocks having such a stellar run on Tuesday?

Some 75% of the world's consumption of lithium goes into rechargeable batteries.

Key points
  • ASX 200 lithium stocks are trouncing the benchmark today
  • A new Industry Department report significantly increases lithium export earnings estimates
  • EV sales are expected to grow tenfold over the next decade

S&P/ASX 200 Index (ASX: XJO) lithium stocks are shooting higher today.

The ASX 200 itself is up a very solid 2.3% in morning trade, following a strong run in US markets yesterday (overnight Aussie time).

But the leading ASX 200 lithium stocks are running far hotter.

The Pilbara Minerals Ltd (ASX: PLS) share price is up 6.4%, with $75 million worth of trades having taken place in the first 90 minutes of trading today.

Meanwhile, shares in Allkem Ltd (ASX: AKE), formerly known as Orocobre, are up 7.1%, and the Core Lithium Ltd (ASX: CXO) share price is soaring 5.9%.

So, what's stoking investor interest on Tuesday?

Man pointing at a blue rising share price graph.

Image source: Getty Images

Why are ASX 200 lithium stocks shooting higher?

Companies like Pilbara, Allkem and Core Lithium have been enjoying strong tailwinds amid booming growth in global EV markets.

According to the Industry Department's latest quarterly Resources and Energy Report, released today, 75% of the world's consumption of lithium goes into rechargeable batteries.

The report also notes that EV sales are expected to grow tenfold over the next decade. And Australia, the world's biggest exporter of lithium, is well placed to make hay, producing 46% of the world's lithium supply in 2020.

In other good news for investors in ASX 200 lithium stocks, the Industry Department sees a strong run higher in lithium prices heading into 2023.

According to the report: "We expect lithium hydroxide prices to lift from US$17,370 a tonne in 2021 to US$38,575 a tonne in 2022 and US$51,510 in 2023, and moderate to US$37,650 by 2024."

As for export earnings from the battery critical metal, the report notes:

Australia's lithium export earnings are forecast to increase by more than tenfold in just two years from $1.1 billion in 2020–21 to $13.8 billion in 2022–23, and ease to $12.9 billion by 2023–24.

Revenue forecasts revised upwards

Also likely piquing investor interest in ASX 200 lithium stocks today, is the Industry Department's upwards revisions of lithium export revenues since its June 2022 quarterly report.

That report estimated $4.1 billion in revenue for 2021-22, while the new figures come in at $4.9 billion.

But that's nothing compared to the 2022-23 forecast.

The report states: "Notably, lithium exports are now forecast to rise by over 180% to $13.8 billion in 2022-23."

The Industry Department expects export revenues to dip to $12.9 billion in 2023-24 "as prices ease".

That easing shouldn't be all too onerous for ASX 200 lithium stocks, however, if we bear in mind the $1.1 billion of export earnings in 2020-21.

Motley Fool contributor Bernd Struben 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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