The lithium industry was a great place to invest in 2022 despite an end of year pullback.
A good number of ASX 200 lithium shares have recorded strong gains this year in a volatile stock market.
The big question now, though, is whether it is too late to invest in the industry? Let's take a look:
Should I buy ASX 200 lithium shares in 2023?
Buying ASX 200 lithium shares or not in 2023 is perhaps not as easy a choice to make as it was a year ago.
The recent online auction held by Pilbara Minerals Ltd (ASX: PLS) revealed a spot of weakness in pricing month on month. This has sparked fears that prices could soon collapse in line with Goldman Sachs' bearish estimates. As a reminder, it is forecasting:
- Spodumene 6%
- 2022 US$4,233
- 2023 US$4,330
- 2024 US$800
- 2025 US$800
These forecasts compare unfavourably to the latest Pilbara Minerals' auction price of US$8,299 per dry metric tonne. In fact, these estimates imply a whopping 90% decline in spodumene prices by 2024.
As a result of this, it will come as no surprise to learn that Goldman Sachs has a preference for producers rather than developers or explorers right now.
After all, lithium developers such as AVZ Minerals Ltd (ASX: AVZ) and Liontown Resources (ASX: LTR) could miss the boat on the high prices and commence production when prices have collapsed.
For this reason, Goldman Sachs is recommending ASX 200 lithium miner Allkem Ltd (ASX: AKE) as a buy with a price target of $15.20.
Any other buys?
This month the team at Morgans initiated coverage on Pilbara Minerals with a hold rating. However, with its shares being hammered on that day, the broker upgraded the lithium miner's shares to an add rating with a $4.70 price target the very next day. It commented:
Given the steep drop in the share price today, we see more opportunity than we did when we published our initiation yesterday. […] Sentiment towards the sector could weaken further in the very short term but we expect that strong 2Q cash flows and the potential for capital management may change investors' minds.
Morgans also recently initiated coverage on Mineral Resources Ltd (ASX: MIN) shares with an add rating and $94.00 price target. It described the company as a "formidable resource player with lithium clout." The broker adds:
MIN is a business that is transforming from being primarily leveraged to high-cost / short-life iron ore operations to low-cost / long-life iron ore and lithium assets. This transition accelerated in the September quarter 2022 post Wodgina's restart. We expect the growth planned for all segments will see MIN remain supported.
All in all, there's still plenty of support for select ASX 200 lithium shares in 2023 in the broker community. Time will tell if they have made the right call.
