ASX lithium shares tumble as falling prices hit export values

Here are all the details from a new report released today.

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Falling lithium prices have not only sent ASX lithium shares spiralling but have also weighed down Australian export values over the past year, according to new data released today.

The Australian Bureau of Statistics (ABS) said the Export Price Index fell 2.1% in the March 2024 quarter and 8.3% over the 12 months to 31 March.

The ABS says weaker export prices for resources, particularly lithium, drove the overall decline.

Non-rural exports fell 2.7% in the March quarter and 9.4% through the year. This included an overall 58.1% fall in the price for the 'crude fertilisers and minerals' category of exports.

Within this category is lithium, which had "unprecedented" falls in price, according to the ABS report. 

Michelle Marquardt, ABS head of prices statistics, said:

Lithium prices fell this quarter, driven by excess global supply.

Investment in global lithium production was driven by the high prices of 2022 and the forecasts for growth in electric vehicle sales. 

This led to a more than 40 per cent annual increase in global lithium output in 2023.

This massive increase in output drove lithium prices down, with the carbonate price crashing by 80%.

What drove the fall in lithium prices?

Marquardt said EV sales had been weaker than expected amid the rising global supply of lithium:

Prices have been driven down by slower than expected electric vehicle adoption.

This reduced lithium demand, as battery manufacturers draw down on record high inventories.  

Export prices on other resources experienced minor falls over the year compared to lithium.

There was a 1.6% fall in metalliferous ores and metal scrap prices due to an oversupply of iron ore amid weaker demand in the Chinese construction sector and high inventory levels at Chinese ports.

A 1% drop in natural and manufactured gas prices was driven by lower oil price contracts from late 2023 and weaker global weighing-down spot prices.

A 0.8% dip in the price of coal, coke and briquettes was driven by lower thermal coal prices as a warmer-than-expected winter season in the northern hemisphere reduced restocking demand.

What did all this do to ASX lithium shares?

The ABS report covers the 12 months ending 31 March.

Over this time period, ASX lithium shares fell for most of 2023 but then stabilised and even retraced about 20% of losses in the first quarter of 2024.

Over the 12 months to 31 March:

  • Lake Resources N.L. (ASX: LKE) shares crashed 84.4%
  • Core Lithium Ltd (ASX: CXO) shares fell 81%
  • Liontown Resources Ltd (ASX: LTR) shares lost 54.7%
  • Mineral Resources Ltd (ASX: MIN) shares dropped 12.1%
  • Pilbara Minerals Ltd (ASX: PLS) shares declined 2.8%

When will lithium prices bottom out?

Top broker Goldman Sachs predicts lithium prices will bottom in 2025 and rise from there.

The Federal Department of Industry and Resources is tipping a rocky road ahead for lithium prices.

In the latest resources and energy quarterly report, the department said:

In February 2024, the spodumene price fell to an average of US$1,000 a tonne, while the lithium hydroxide price fell to average US$13,350 a tonne.

The lithium spodumene price is forecast to rise (in real terms) to about US$1,360 a tonne by 2026, before falling to about US$1,090 a tonne by 2029.

The fall in prices over 2023 has driven a reduction in production (particularly by some high-cost producers). This is likely to support a modest recovery in the lithium prices over 2024 and 2025.

From 2026, alternate battery chemistries could place some price pressure on lithium-ion EV batteries, resulting in a fall in lithium prices for the rest of the outlook period.

The department is expecting an average FY24 lithium price of US$1,800 per tonne for spodumene.

This is down from US$5,174 per tonne in FY23.

The report canvasses a five-year outlook for all commodity prices.

The department anticipates the spodumene price to be US$1,231 per tonne in FY29.

Motley Fool contributor Bronwyn Allen has positions in Core Lithium. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Goldman Sachs Group. 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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