Is the lithium price pain 'already nearing an end'?

Two analysts in China say the lithium price pain is close to a conclusion.

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A spike in Chinese and United States lithium stocks over the past two days has prompted speculation that some investors may be anticipating a recovery in the commodity price and, thus, equity values.

It's been a protracted plummet for lithium prices since they peaked in late 2022.

This week, the lithium carbonate spot price dropped to its lowest level since August 2021 at US$13,843 per tonne. That's a more than 80% fall in 2023 alone.

But over the past two days, Chinese lithium giants Tianqi Lithium Corp UP and Ganfeng Lithium Group Co Ltd have made strong gains.

Tianqi shares are up 6.1%. The stock has lost 31% of its value in the year to date. Ganfeng shares rose 6.1% over the two days, and are down by more than 40% in 2023.

US lithium stocks also moved higher over the two days.

NYSE-listed lithium stocks Albemarle Corporation gained 10.7%, Livent Corp went up 11.1% and Sociedad Quimica y Minr de Chile SA rose 6.1%.

Today, ASX lithium shares are also rising, with all the well-known names up by more than 2%.

Here are some examples:

  • Core Lithium Ltd (ASX: CXO) shares are up 3.9%
  • Allkem Ltd (ASX: AKE) shares are up 3.3%
  • Mineral Resources Ltd (ASX: MIN) shares are up 3.1%
  • Pilbara Minerals Ltd (ASX: PLS) shares are up 4.1%
  • Sayona Mining Ltd (ASX: SYA) shares are up 7.4%
  • Liontown Resources Ltd (ASX: LTR) shares are up 2.8%
  • IGO Ltd (ASX: IGO) shares are up 2.1%.

The price pain is almost over, says analyst

Lithium prices are weak due to slowing growth in global sales of electric vehicles (EVs). This is leading to lower demand for lithium in China, the world's biggest EV manufacturer.

At the same time, the global lithium mining industry has been ramping up, and as a result, global stockpiles of the white metal have also increased.

But China Futures Co analyst Zhang Weixin said the downward trend in lithium prices is "already nearing an end".

Weixin reckons they are likely to bottom out between US$11,240 and US$12,650 per tonne (courtesy Australian Financial Review (AFR)).

Traxys advisor Wei Xiong agrees but says an extended period of weakness is still likely.

He says he'll be watching to see "whether high-cost mines will exit" if lithium prices get too low to make operations viable.

By the way, investors can find out how much it costs each miner to produce a tonne of lithium in their company reports.

At the recent Liontown Resources annual general meeting, chair Richard Goyder reminded shareholders that the estimated decade-average cost of production at Kathleen Valley was US$475 per tonne.

Thus, they'll still get "a healthy margin" despite the lithium spodumene concentrate price dropping to US$1,590 per tonne.

Goldman Sachs says lithium prices won't bottom till 2025

Top broker Goldman Sachs reckons lithium prices will finally reach a trough in 2025.

The broker recently downgraded its lithium price forecasts again.

It had been tipping US$15,000 p/t for lithium carbonate but is now forecasting US$11,000 p/t.

It was also forecasting US$16,500 p/t for lithium hydroxide but has reduced that to US$12,000 p/t.

The question is whether ASX lithium share investors should care about any of this short-term noise on lithium prices.

After all, this commodity will play a key role in the world's decarbonisation for decades.

Motley Fool contributor Bronwyn Allen has positions in Core Lithium. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. 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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