Lithium demand is showing "no signs of slowing" according to ANZ research analysts.
ASX lithium shares include Core Lithium Ltd (ASX: CXO), Allkem Ltd (ASX: AKE), Lake Resources N.L. (ASX: LKE), Sayona Mining Ltd (ASX: SYA) and Pilbara Minerals Ltd (ASX: PLS).
So what could impact the fortunes of ASX lithium shares in the future?
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What is ahead for ASX lithium shares?
Core Lithium shares have exploded 179% in the past year, while Allkem shares have surged 52%. Lake Resources shares have leapt 16% in the last 52 weeks, while Sayona shares have soared 56%. Meanwhile, the Pilbara Minerals share price has rocketed 102.5% ahead. For perspective, the S&P/ASX 200 Materials Index (ASX: XMJ) has jumped nearly 15% in the last year.
However, ASX lithium shares suffered in the market on Tuesday and some are continuing to fall today.
For example, Core Lithium shares fell more than 15% on Tuesday and are down nearly 2% today.
Pilbara Minerals shares descended 9% on Tuesday but are climbing 1% today.
Lake Resources shares descended 7% on Tuesday and are 0.28% in the red at the time of writing.
Research analysts at ANZ have highlighted multiple factors that could be positive for ASX lithium shares in the future.
Commodity strategists Daniel Hynes and Soni Kumari, in a recent research note, highlighted that China's lithium carbonate imports are on the rise. Analysts said:
Demand for battery minerals shows no signs of slowing. Retail sales of new energy vehicles in China jumped by 75% y/y in October to 556,000 units.
China's imports of lithium carbonate were up 21% m/m in August.
Another potential boost for lithium could be the US Reduction Act.
Further, strategists highlighted the benefit of US President Joe Biden's Inflation Reduction Act. This Act provides tax breaks for new electric vehicle purchases.
Under the legislation, the critical minerals used in the EV batteries must come from the US or a country with a free trade agreement with the USA. This could be an opportunity for Australia.
Commenting on this incentive, analysts said:
The US's Inflation Reduction Act has spurred producers and battery manufacturers to look at capitalising on possible incentives that the new legislation provides to countries with free trade agreements with the US.
Imports of lithium carbonate subsequently surged 86% m/m in August. This comes as supply disruptions from Sichuan's power issues persist.
What else?
Analysts at Macquarie are still positive on lithium shares despite the falls on Tuesday, the Financial Review reported. Lithium carbonate futures fell 6.2% on Tuesday on the Wuxi Stainless Steel Exchange but have since jumped 1.5%, analysts noted. Macquarie said:
Despite near-term future price volatility, we believe buoyant lithium prices present potential for valuation upside to all lithium names under our coverage universe.
In other news, Indonesia is in talks with Australia on a potential lithium partnership, The Australian reported earlier this week. Australian Prime Minister Anthony Albanese has joined multiple global leaders in Bali for a G20 Leaders' Summit this week. Responding to questions on the potential of critical mineral partnerships including Lithium on Tuesday, Albanese said:
Indonesia will grow, along with India, next year's host of the G20, to be in the top four economies in the world over coming decades.
There's enormous opportunity for Australia. There's enormous goodwill. And the fact that Australia has the largest business delegation here at the B20 is a sign of that.
