The performance of S&P/ASX 200 Index (ASX: XJO) lithium shares, as you'd expect, is closely linked to the price of the battery-critical metal.
November 2022 saw the lithium price hit all-time highs as demand, particularly out of China, outpaced new supplies. This also saw most ASX lithium stocks, large and small, enjoy some significant gains.
But as EV sales growth slowed in China and more supply has come online, the lithium price crashed into April, reaching lows not seen since October 2021.
Following a two-month rebound from there, the lithium price again began trending lower again in July. Today, spodumene concentrate (a lithium-bearing mineral) is trading for just over US$3,400 a tonne.
With those price swings in mind, here's how these ASX 200 lithium shares have performed over the past 12 months:
- Pilbara Minerals Ltd (ASX: PLS) shares have gained 46%
- Core Lithium Ltd (ASX: CXO) shares have dropped 42%
- Allkem Ltd (ASX: AKE) shares have gained 30%
- IGO Ltd (ASX: IGO) shares have gained 1%
- Liontown Resources Ltd (ASX: LTR) shares have gained 123%
Now, what can investors expect in the years ahead?
Headwinds ahead for ASX 200 lithium shares?
Most lithium producers are expected to remain profitable, even with some sizeable expected retraces in the lithium price.
But any significant fall in the price of the battery-critical metal will impact their profits and put downward pressure on ASX 200 lithium shares.
With that said, here's what some top analysts are forecasting for the lithium price over the coming years.
What are the experts saying about the lithium price?
E&P analyst Adam Martin forecasts spodumene prices will average US$3,475 per tonne in FY 2024 and US$2,200 per tonne in FY 2025 before slipping all the way to US$1,800 a tonne in FY 2026.
And if you're investing in ASX 200 lithium shares, take heed.
According to Martin, "Commodity prices don't move gradually or linearly, so it is quite possible any price decline is sudden and volatile."
Head of battery raw materials at CRU Martin Jackson noted that China's sluggish economic growth could impact EV demand, driving the past week's decline in the lithium price.
According to Jackson (quoted by The Australian Financial Review):
As for the short rally we saw, it was in response to improving procurement activity from manufacturers, but it seems speculation probably drove prices higher than fundamental support… There's still a lot of concern regarding the Chinese economic situation.
However, in good news for ASX 200 lithium shares, Jackson stressed that despite the slowdown in Chinese demand, CRU expects demand growth to remain strong.
"We're still expecting almost 30% year-on-year growth in demand for lithium this year, and it's natural for maturing market growth rates to slow," he said.
And even with more lithium mines coming into production, Jackson forecasts the lithium price could well move up from today's levels:
We believe there's room for prices to rise further in 2023. Prices are expected to average US$4,650 per tonne in 2023, but prices will remain around US$4,100 per tonne for the remainder of the year.
