Lithium prices have floundered since hitting their peaks in November 2022, falling about 70% over the past six months.
And they've taken ASX lithium shares with them.
The six-month chart below shows the share price falls of producers Pilbara Minerals Ltd (ASX: PLS), Allkem Ltd (ASX: AKE), Mineral Resources Ltd (ASX: MIN), and Core Lithium Ltd (ASX: CXO).
But a number of experts are tipping a rebound of 40% or more for lithium prices by the end of the year.
Let's investigate why.
Are we on the cusp of the next lithium boom?
According to the Australian Financial Review (AFR), that's the opinion of top broker Citigroup.
Chinese sales of electric vehicles (EVs) have moved up every month in 2023, following the end of COVID-19 restrictions in late 2022.
Citi says downstream producers are starting to restock, and policy support in China will further boost its EV sales.
China is the world's largest EV manufacturer and the second-largest importer of lithium behind South Korea.
The price of lithium carbonate, which is used to manufacture EV batteries, fell from a peak of about US$85,000 in November 2022 to a 19-month low of about US$22,000 per tonne in April.
It has since rebounded to about US$28,000 per tonne this week.
Citi analyst Shreyas Madabushi said:
We believe the battery supply chain destocking cycle in China is in its final phase and active restocking in the second half of 2023 is likely to support prices at higher levels.
Market sentiment for lithium stocks has also improved on the back of the Albemarle bid for Liontown Resources Ltd (ASX: LTR) and the recently announced $15.7 billion merger between Allkem and Livent.
Chile's decision to nationalise its industry and take a controlling stake in all new producers has also changed global supply chain dynamics.
The country is the world's second-largest producer of lithium, and government intervention may lead to short-term uncertainty, during which time battery and EV manufacturers may go elsewhere for supply.
How high will the lithium price go in 2023?
Citi reckons the lithium price could go to between US$35,000 per tonne and US$40,000 per tonne by the end of 2023.
Morgan Stanley is also bullish on the short-term lithium price outlook. The broker said last week that the market had reached a "turning point".
According to The West Australian, Minerals Resources CEO Chris Ellison also reckons there's "no question that [lithium] prices have bottomed out".
Ellison is expecting lithium prices to move higher over the next few months.
A few other brokers are predicting a rebound in lithium prices in 2023 and into 2024.
Macquarie thinks the price could go as high as US$57,500, and UBS is tipping US$54,750.
