If you owned S&P/ASX 200 Index (ASX: XJO) lithium stocks in 2021 and 2022, you likely enjoyed some outsized share price gains at the time.
That period saw a massive increase in lithium demand amid strong growth in global battery markets, particularly to power EVs.
With new supplies lagging that demand growth, lithium carbonite prices soared to all-time highs north of US$80,000 per tonne by November 2022.
Over the following year, as you're likely aware, the price of the battery-critical metal fell off a cliff, tumbling more than 80% as demand growth slowed and new supplies flooded the market.
ASX 200 lithium stocks came under heavy selling pressure and continue to broadly underperform this year.
Here's how these top producers have fared so far in 2024:
- Pilbara Minerals Ltd (ASX: PLS) shares down 4.7%
- Core Lithium Ltd (ASX: CXO) shares are down 43.7%
- IGO Ltd (ASX: IGO) shares are down 19.8%
- Liontown Resources Ltd (ASX: LTR) shares are down 29.5%
For some context, the ASX 200 is up 2.2% year to date.
But in potentially good news for ASX 200 lithium stocks, one leading fund manager believes the market is poised to rebound.
Image source: Getty Images
ASX 200 lithium stocks moving back towards balanced markets
As The Australian Financial Review reports, modelling by Ethical Partners indicates global lithium markets are heading "rapidly back" towards equilibrium. Contrary to more bearish forecasts from the likes of Goldman Sachs, the fund manager is even flagging the potential for demand to exceed supply again.
Part of the forecast stems from lower production targets among numerous lithium producers, who are looking to cut costs amid lower spot prices.
According to Sam Cox, an analyst at Ethical Partners, "Since November, we believe the lithium market has moved from an 8% surplus in 2024 to roughly in balance."
In potentially good news for ASX 200 lithium stocks in the months ahead, Cox said, "While demand will still be a key driver of price direction from here, we see green shoots … The market has yet to identify this trend and is still looking backwards."
Cox added:
From 2021 to 2023, lithium supply almost doubled. We estimate a quarter of this supply came from sources not producing in 2020.
But Ethical Partners already sees that trend reversing, with the lithium price rebounding around 10% so far in 2024.
Which ASX lithium producers are set to benefit?
While most ASX 200 lithium stocks should benefit from any rebound in the price of the battery-critical metal, Ethical Partners currently only owns IGO shares.
According to Cox (quoted by the AFR), that's because IGO is the only miner that meets the fund manager's cash flow requirements.
For its half-year results, IGO reported an underlying free cash flow of $434 million, up from $433 million in the prior corresponding half-year.
IGO held $267 million in cash with no debt at the end of the half-year.
