The Core Lithium Ltd (ASX: CXO) share price has tagged a new one-year low today.
While the S&P/ASX 200 Materials Index (ASX: XMJ) is enjoying a day in the green on Tuesday, the sentiment has not carried to Core Lithium shares — or ASX lithium shares more generally, for that matter. At the time of writing, common lithium names Allkem Ltd (ASX: AKE) and IGO Ltd (ASX: IGO) are well in the red, with Pilbara Minerals Ltd (ASX: PLS) being a notable exception.
So, what is summoning such a disappointing showing by the Core Lithium share price today?
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Liftoff into a lithium lull?
Core Lithium has traversed the gap between lithium explorer to producer. As noted in its Diggers and Dealers presentation today, the company made a maiden 5,500-tonne spodumene concentrate shipment in April. That was closely followed by an additional 13,100-tonne shipment in July.
One would assume the market would be ecstatic about Core reaching production. However, now the concerns likely centre around valuation. At a market capitalisation of $1.14 billion, this ASX lithium share has some boots to fill.
There are three all-important numbers for Core Lithium shareholders now: production volume, lithium price, and production costs (C1 costs).
Two weeks ago, investors were disappointed by the outlook on FY2023 and FY2025 production. As previously reported, spodumene production for these periods was advised to be 85,000 tonnes (at the midpoint) for FY23 and even less in FY25 — far lower than analysts anticipated.
Additionally, C1 costs were revised higher to between A$1,165 and A$1,250 per tonne.
That's two out of those three aforementioned metrics now looking grim. Today, E&P — an internationally operating broker — shot an arrow through the third marker.
The multi-billion-dollar wealth adviser cast a negative outlook on the future of lithium prices. Expecting a glut of supply to hit in the coming years, E&P expects spodumene prices to shrivel from their current US$3,500 a tonne value to US$2,200 in FY25 before deteriorating further to US$1,800 in FY26.
If this were to play out, it could mean the Core Lithium share price has overshot its true earnings potential.
Core Lithium share price under pressure
Exacerbating the concerns, many short sellers are banking on more lows to come.
On Monday, Core Lithium shares took the top spot as the most shorted ASX share, reaching an 11.3% short interest. As such, E&P's price forecasts only serve as further fodder for shorters to galvanise their conviction and add to their short positions.
Without positive information, the Core Lithium share price may struggle to shake out those shorting the company.
The company's shares are down 55% over the past year despite reaching the production milestone.
