The Core Lithium Ltd (ASX: CXO) share price gained an impressive 72.9% in 2022.
But the ASX lithium stock certainly didn't deliver those gains smoothly.
The Core Lithium share price ranged from lows of 60 cents in January to highs of $1.88 in November. The miner closed the year trading for $1.02 per share.
And as you can see in the chart below, there was plenty of volatility in the company's march higher over the course of the year.
So, why were investors faced with such wild swings in 2022?
Why all the volatility?
Throughout the year gone by, the Core Lithium share price alternately rocketed higher or was pushed lower largely based on investor expectations of lithium prices.
The lightweight, conductive metal is a critical element in most electric vehicle and home storage batteries. The global EV market, in particular, expanded rapidly in 2022 and is expected to continue on a strong growth trajectory over the coming years.
With lithium supplies in 2022 initially falling below demand, the price more than doubled last year and is up more than 10-fold since early 2021.
That drove investor exuberance for most lithium stocks, driving up the Core Lithium share price.
Investors are also enthusiastic about the miner's Finniss Lithium Project, located in the Northern Territory. Finniss is scheduled to commence production this year.
However, not everyone believes that the sky-high lithium prices have been warranted. Indeed, prices have retraced by more than 3% since the mid-November peak.
As for the Core Lithium share price, it fell 45% from its 14 November highs by 30 December.
While the longer-term outlook for lithium demand remains strong, analysts, including those from Goldman Sachs, believe the medium term could see increased supply hitting the market just as some of the demand comes off.
Goldman's commodity experts are among those who forecast that lithium prices will come off the boil in the second half of 2023.
Part of the recent concerns stems from China, the world's biggest manufacturer of EVs. Alongside the government's plans to eliminate subsidies for new EV sales, rocketing COVID cases could throw up some major headwinds for the Chinese economy.
As in 2022, bearish forecasts on lithium prices are likely to send the Core Lithium price lower this year while bullish news could see the miner again charging higher.
How has the Core Lithium share price performed longer-term?
Volatility or not, you're unlikely to hear any long-term investors complaining up their holdings.
Over the past five years, the Core Lithium share price has rocketed 1,030%. Boom!
