Where will ASX lithium shares go in 2023?

The per-kg price for the battery material has fallen by 75% over the past six months. What will become of our mining stocks?

Anything related to lithium has been hot among ASX investors the past few years, but the price for the battery material has fallen off a cliff recently.

According to dailymetalprice.com, the per-kilogram price for lithium was in the $80s in December but sunk to the mid $20s by the start of this month.

Yikes.

Understandably that drop put downward pressure on ASX lithium shares during the first quarter of 2023.

So with so many investors reliant on such stocks in their portfolios, where is the battery ingredient headed this year?

The analysts at Firetrail Absolute Return Fund fired up their crystal ball this week to answer this dilemma:

Three miners stand together at a mine site studying documents with equipment in the background.

Image source: Getty Images

What happened to the lithium price?

Firstly, the team pointed out that the world's second largest economy was to blame for the calamitous drop in the lithium price.

"After a stellar 2022, lithium prices have experienced a sharp reversal so far in 2023," read the Firetrail memo to clients.

"China's lithium prices are down around 70% year-to-date."

But the great news is that it seems to be turning around in the middle kingdom.

"Prices bottomed around $21/kg in April before starting to move higher again recently," the memo read.

"Sentiment is improving, inventory levels at downstream converters have fallen at the same time supply growth has disappointed."

What will happen to the lithium price?

We have all read many times how much lithium is, and will be, in demand in the coming years.

But the Firetrail team notes that it's not a simple matter for the miners to turn up production of the elusive mineral.

"Production misses from the likes of Mineral Resources Ltd (ASX: MIN), Pilbara Minerals Ltd (ASX: PLS) and others [continue] to highlight the complexity of ramping up and maintaining full rates of production."

But with the prices seemingly passing a trough, Firetrail analysts are predicting a bright outlook for the rest of this year. 

"An acceleration of electric vehicle sales in China and battery production could provide upside to lithium prices in the second half of 2023."

Already the Pilbara share price is up around 26% over the past month in anticipation of a rebound in commodity prices.

Motley Fool contributor Tony Yoo 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.

More on Resources Shares

Miner and company person analysing results of a mining company.
Resources Shares

PLS Group vs Mineral Resources: ASX mining shares compared

Weighing up PLS Group vs Mineral Resources shares? I compare the fundamentals, recent performance and dividends, and pick my preferred…

Read more »

Two people wearing hard hats talking with each other at a mine site, with two workers in the background.
Resources Shares

Is the Fortescue share price a cheap buy?

I crunch the earnings forecasts to see whether this fallen mining share is actually good value.

Read more »

Three miners looking at a tablet.
Resources Shares

Regis Resources vs Fortescue: Which ASX miner is the better buy?

Regis Resources or Fortescue? I compare value, yield, and share price momentum to pick my preferred ASX mining stock now.

Read more »

Young successful engineer, with blueprints, notepad, and digital tablet, observing the project implementation on construction site and in mine.
Resources Shares

Which junior ASX mining stock has surged 50% on big news?

A takeover deal has put a rocket under this company's shares.

Read more »

A miner shakes hands with a businessman or banker inside an underground mine setting.
Resources Shares

Yancoal Australia share price in focus as Kestrel Coal Mine deal closes

Yancoal Australia shares are in the spotlight after finalising its acquisition of an 80% interest in the Kestrel Coal Mine.

Read more »

Woman shaking the hand of a man on a deal.
Resources Shares

Lynas to acquire Meteoric Resources in major rare earths deal

Lynas Rare Earths will acquire Meteoric Resources in an all-share deal, strengthening its rare earths portfolio and expanding its global…

Read more »

a man with a hard hat and high visibility vest stands with a clipboard and pen in front of a large pile of rock at a mining site.
Resources Shares

Yancoal shares in focus after Hunter Valley mine approval

Yancoal Australia gains NSW approval to extend Hunter Valley Operations mining until 2045, supporting jobs and regional growth.

Read more »

Cheerful businessman with a mining hat on the table sitting back with his arms behind his head while looking at his laptop's screen.
Resources Shares

Liontown Resources approves $389m Kathleen Valley lithium expansion

Liontown Resources approved a $389 million expansion at Kathleen Valley, aiming to boost production by 56% and further cement its…

Read more »