S&P/ASX 200 Index (ASX: XJO) lithium stocks, with one notable exception, have had a tough slog over the past months.
The big lithium shares were broadly rocketing higher into November, as lithium prices hit all-time highs.
But as near-term supplies of the battery critical mineral caught up with demand and China ended its EV subsidies (among other headwinds), the lithium price cratered, currently trading for less than half its November peak.
That, as you'd expect, spooked a fair number of investors into hitting the sell button.
Here's how these leading ASX 200 lithium stocks have performed over the past six months:
- Pilbara Minerals Ltd (ASX: PLS) shares are down 22%
- Core Lithium Ltd (ASX: CXO) shares are down 29%
- Allkem Ltd (ASX: AKE) shares are down 21%
- IGO Ltd (ASX: IGO) shares are down 14%
- Mineral Resources Ltd (ASX: MIN) shares are up 14%
- Liontown Resources Ltd (ASX: LTR) shares are up 50%
Mineral Resources has managed to evade the sell-off, perhaps buoyed by significant positive broker coverage in recent months. The company is also more diversified than most of its competition, deriving significant revenue from mining services and iron ore.
The real standout, of course, is Liontown Resources.
The ASX 200 lithium stock was also well into the red over a six-month period heading into the end of March. That's when news broke that the miner had received, and rejected, a $2.50 per share takeover offer from international industry giant Albemarle. Shares are up 81% since then.
Of course, that's all water under the bridge now.
Here's what UBS expects from ASX 200 lithium stocks now.
What's next for ASX 200 lithium stocks?
As reported by The Australian, broker UBS has reduced its earnings forecasts for lithium miners by 10% to 40%. Price forecasts for 2023 and 2024 were decreased by 10% to 30%.
Long-term investors should note, however, that UBS upgraded its long-term lithium spodumene, concentrate, and hydroxide price forecasts by 20%, which it said will largely offset lower near-term earnings.
Addressing the current demand weakness in China that's depressing the lithium price and throwing up headwinds for ASX 200 lithium stocks, UBS analysts noted:
This sentiment was further backed up by our global EV/battery team's 7th annual EV consumer survey which reported its first sequential decline in EV popularity, driven by European markets on affordability concerns, and forcing downgrades to UBS's near-term EV outlook.
Citing the "increasing cost of supply response" over the longer term, the analysts said, "Our review of the currently slated supply response suggests higher prices are required and we have increased our long-term prices across the board by about 20%."
The UBS analysts added:
This revised long-term price deck sits comfortably and conservatively against new sources of supply, Chinese lepidolite production, industry participant feedback, and consensus forecasts.
Rating changes
Despite the shorter-term price pressures, the broker remains quite bullish on many ASX 200 lithium stocks.
UBS upgraded Pilbara Minerals to a buy with a price target of $4.60 per share, some 16% above the current share price of $3.97. The broker labelled Pilbara Minerals a "preferred high beta play to any near-term bounce".
IGO retained its buy rating with a boosted price target of $19.10 per share, a whopping 36% above the current $14.07 per share. UBS said IGO "remains a preferred quality, long-term option, something only reinforced by its latest nickel downstream venture with Wyloo".
As for some of the other ASX 200 lithium stocks, UBS maintained its buy rating on Allkem and Mineral Resources, with a neutral rating on Liontown.
