What is the outlook for ASX lithium shares in 2024?

How are things looking for these miners?

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ASX lithium shares have seen plenty of pain over the last 12 months. After all of the declines, what is the outlook for that sector in 2024 and beyond?

Look at where the share prices of a number of ASX's biggest lithium names have gone in the past year:

The Pilbara Minerals Ltd (ASX: PLS) share price is down around 20%.

The Allkem Ltd (ASX: AKE) share price is down 36%.

The Mineral Resources Ltd (ASX: MIN) share price is down 24%.

The IGO Ltd (ASX: IGO) share price is down 42%.

The Liontown Resources Ltd (ASX: LTR) share price is down 26%.

The Sayona Mining Ltd (ASX: SYA) share price is down 65%.

What has happened to the lithium price?

In the latest Pilbara Minerals quarterly update for the three months to September 2023, it acknowledged that the spodumene concentrate realised price had fallen by 47% year over year from US$4,266 per tonne in the prior corresponding period to US$2,240 per tonne in the latest quarter.

The quarter-over-quarter spodumene concentrate price was down 31% from US$3,256 per tonne in the three months to June 2023 to US$2,240 per tonne. Obviously, this is key for ASX lithium shares.

While the price has fallen, Pilbara Minerals is still confident on the future. As reported by Reuters, the Pilbara Minerals CEO Dale Henderson said:

Demand is absolutely there. It's just a case of moderating pricing. It's still a very healthy market.

What could happen for ASX lithium shares in the medium term?

Reuters quoted Bank of America analysts who said that the next couple of years may not be strong for the lithium sector:

As the lithium market balances shift to adequately supplied in 2023 and oversupplied in 2024/2025, we expect to see a period of earnings and margin pressure across the value chain.

In September, Reuters quoted Susan Zou from Rystad Energy who said:

Battery manufacturers have showed no sign of hiking their orders in the third and fourth quarters, leading to cautious buying of lithium, especially as they anticipate prices might fall further.

No one can truly know what's going to happen with the lithium price or ASX lithium shares in 2024 because of how unpredictable short-term supply and demand can be. I'll leave the last word to investment bank UBS which wrote a note in early November. While acknowledging a near-term rise in supply, it said:

As we work through the first real exploration cycle for lithium since material EV demand, we are starting to get a picture of future supply. While there has been a large number of juniors "exploring" and making "discoveries", so far: 1) none are "disruptive" in scale and 2) few will materially impact the supply side by the end of the decade by which time we expect demand to have lifted ~4x.          

…A significant supply response to ongoing demand and high prices is underway but given the robust long-term demand outlook, we need almost all of the supply we can identify and it requires higher long-term prices.

Bank of America is an advertising partner of The Ascent, a Motley Fool company. Motley Fool contributor Tristan Harrison has positions in Pilbara Minerals. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Bank of America. 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.

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