Why are ASX lithium shares like Liontown having such a bumper session today?

Lithium shares are defying the broader market on Wednesday.

| More on:
A happy businessman pointing up, inidicating a rise in share price

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The S&P/ASX 200 Index (ASX: XJO) is having a fairly depressed kind of day so far this Wednesday. At the time of writing, the ASX 200 has slipped by around 0.15%. But ASX 200 lithium shares like Liontown Resources Ltd (ASX: LTR) are having a very different experience.

Liontown shares are on fire today. This lithium stock is currently up a whopping 7.97% at $1.25 a share.

But these gains aren't just confined to the Liontown share price. The ASX's largest lithium stock, Pilbara Minerals Ltd (ASX: PLS), is experiencing something similar, with Pilbara shares up 5.54% so far today at $4.10 each.

Sayona Mining Ltd (ASX: SYA) stock has risen 7.7%, while Arcadium Lithium plc (ASX: LTM) shares have increased by 4.43% at present.

So something is clearly in the water with lithium shares today.

Why are ASX 200 lithium shares like Liontown surging today?

Unfortunately, it's not really clear what that something in the water actually is. There's been no major ASX news out today from any of the big lithium stocks.

Looking at the US markets might provide some explanation, though.

Last night during US trading, we saw the share price of Albemarle Corporation (NYSE: ALB) rise significantly. Albemarle, a US$15 billion lithium giant, experienced a 5.82% surge in value last night, with the shares rising from US$121.52 up to US$128.59.

This was potentially a result of a major US broker in Mizuho raising its share price target from US$105 to US$115.

As one of the largest lithium stocks in the world, Albemarle shares often set the tone for what happens with the ASX's lithium players.

So that's one possible explanation for this bullishness we are seeing with Liontown shares and the like.

Another factor we can potentially point to is a growing sense that lithium prices may have found a bottom. ASX lithium shares like Liontown have been smashed in recent months as global lithium prices have plummeted. We saw this quantified in the recent ASX earnings reports from Pilbara Minerals and other lithium shares.

Have lithium prices found a bottom?

Sam Berridge, portfolio manager and resources specialist at Perennial Funds Management, recently told the Australian Financial Review (AFR) that "We are at the bottom… The big question is how long will [lithium] prices go sideways, and that depends on demand, rather than supply".

The same report quoted Ben Cleary of Tribeca Investment Partners, who said:

I don't expect [lithium spodumene] prices to bounce back towards where they were [around $US8,000 per tonne)… But I am comfortable that we could see long-term prices around $US1,200 which would still give Australian producers $US600 a tonne on a 50 per cent operating margin.

Of course, we also can't discount a simple reversion to mean for ASX lithium shares. Before this week, the Liontown share price, as well as that of Pilbara Minerals and other ASX lithium shares, were exploring multi-year lows. It's also possible that some investors are thinking that it's time to start buying back in at these historically low share prices.

Whatever the cause of today's strong bounce in lithium stocks, it will no doubt be welcomed by investors.

Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. 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.

More on Materials Shares

A man wearing glasses and a white t-shirt pumps his fists in the air looking excited and happy about the rising OBX share price
Materials Shares

Guess which ASX lithium stock is rocketing 15% on big news

Why are investors buying this lithium share on Wednesday?

Read more »

a mine worker holds his phone in one hand and a tablet in the other as he stands in front of heavy machinery at a mine site.
Materials Shares

Mineral Resources share price tumbles amid ongoing lithium price weakness

ASX 200 investors are bidding down the Mineral Resources share price on Wednesday.

Read more »

A group of three men in hard hats and high visibility vests stand together at a mine site while one points and the others look on with piles of dirt and mining equipment in the background.
Materials Shares

Fortescue share price tumbles on Q3 disappoinment

How did this iron ore giant perform during the third quarter?

Read more »

Australian notes and coins symbolising dividends.
Materials Shares

BHP is paying $2.30 per share in dividends. Time to buy the stock?

Do analysts think the Big Australian is a buy?

Read more »

Man on a laptop thinking.
Materials Shares

Are Core Lithium shares dirt cheap or overvalued?

This lithium miner's shares have lost 84% of their value over the last 12 months.

Read more »

Miner looking at a tablet.
Materials Shares

3 key takeaways for ASX lithium share investors from Pilbara Minerals report

What can ASX lithium share investors learn from Pilbara Minerals' latest sales and production results?

Read more »

A female broker in a red jacket whispers in the ear of a man who has a surprised look on his face as she explains which two ASX 200 shares should do well in today's volatile climate
Materials Shares

Here's what brokers are saying about Pilbara Minerals shares

Is this lithium miner a buy following last week's update?

Read more »

A young woman holds her hand to her mouth in surprise as she reads something on her laptop.
Materials Shares

1 ASX All Ords stock that turned $10,000 into $720,000 in less than 5 years

Mouth-watering returns have been delivered by this stock. But why?

Read more »