S&P/ASX 200 Index (ASX: XJO) lithium shares broadly counted among the top performers in 2022.
Some leading ASX lithium stocks more than doubled in value as the price of the battery-critical metal soared to all-time highs in November 2022 amid surging demand and limited new supplies.
But 2023 has been a decidedly different story.
On one side, demand has taken a hit. That decline is being driven by China, the world's biggest lithium consumer, which ended EV subsidies and other incentives for the industry this year.
And with more global mines entering production, supplies have been ramping up just as demand has crimped.
This has seen the price of lithium carbonate crash more than 75% this year. And as you'd expect, it's put some serious pressure on ASX 200 lithium shares.
Here's how these Aussie miners have performed over the past 12 months:
- Pilbara Minerals Ltd (ASX: PLS) shares are down 13%
- Core Lithium Ltd (ASX: CXO) shares are down 20%
- Allkem Ltd (ASX: AKE) shares are down 11%
- IGO Ltd (ASX: IGO) shares are down 8%
- Liontown Resources Ltd (ASX: LTR) shares are down 26%
While all of the above shares are still well into the green over the longer term, the past year has clearly been a struggle.
So, what can ASX investors expect in the year ahead?
What's ahead for ASX 200 lithium shares in 2024?
ASX 200 lithium shares could certainly still see some big moves higher in 2024. But that looks like it will have to be driven by their own exploration, mining, and deal-making successes, and not any turnaround in the lithium price.
According to the latest analysis from Goldman Sachs (courtesy of The Australian Financial Review) investors can expect the global lithium market to be in a 202,000 tonne surplus in 2024.
The broker's commodities analysts noted this "represents 17% of global demand". Therefore, they said they "expect prices to trade deeply into the cost curve to balance the market".
According to Goldman's analysts:
In this context, we maintain our bearish view on the lithium market and lower our 12-month target for China Lithium Carbonate (excluding VAT) to US$11,000 a tonne and CME Asia CIF Lithium Hydroxide to US$12,000/t (from US$15,000/t and US$16,500/t respectively previously).
Lithium carbonate was trading for just over US$16,000 per tonne on Friday.
Among the headwinds facing the lithium price, and by connection ASX 200 lithium shares, Goldman Sachs cited a marked decline in Chinese lithium battery demand volume growth.
"The rise in chemical output has overtaken the growth in China battery output and China's imports of spodumene concentrate (+60 per cent y/y YTD) – particularly from Australia and Zimbabwe – have continued to grow sharply," the analysts said.
They concluded:
At the same point, there remains little evidence of supply rationing, with only an estimated 40kt [kilotonne] of supply loss over the past 12 months due to cost pressures. However, with the market largely balanced year to date, the full extent of supply-led surplus is yet to be realised, with prices still 33% above the top-end of the integrated cost curve.
With lithium prices potentially facing another significant slide in 2024, I expect we'll be hearing more about cost-cutting measures from ASX 200 lithium shares in the year ahead.
