Despite the past two days of solid gains, the Core Lithium Ltd (ASX: CXO) share price remains down 35.7% since this time last month.
Shares in the All Ordinaries Index (ASX: XAO) lithium stock are currently flat, trading at yesterday's closing price of 9 cents apiece. That's down from 14 cents a share a month ago.
And, as you can see on the chart below, it puts the Core Lithium share price down a precipitous 90% over 12 months.
Ouch!
With those kinds of losses already booked, could now be the time to pounce on this beaten-down ASX lithium miner?
Let's dig in.
Image source: Getty Images
What's been pressuring the Core Lithium share price?
While very company faces its own specific operational headwinds each year, the biggest factor driving down the Core Lithium share price has been the meltdown in global lithium prices.
Just what kind of meltdown are we talking about?
Well, over the past 12 months alone, lithium carbonate prices have crashed by some 70% as a surge in new supplies exceeded the demand growth for the battery-critical metal.
Overnight, prices tumbled another 5% to US$12,000 per tonne. That sees the lithium price down 15% in a month, helping explain the ongoing headwinds battering the Core Lithium share price.
As for whether the ASX lithium stock now represents good value, that will largely be determined by the price of lithium in the months ahead.
As you may recall, Core Lithium suspended mining operations at its flagship Finniss Project in the Northern Territory in early January amid crashing lithium prices, which at the time were about 5% above current levels.
Management said it had become unprofitable to continue mining at those prices, flagging a pause until lithium prices recovered. The miner has continued to process established ore stockpiles.
With that in mind, I don't expect we'll see a sustained turnaround in the Core Lithium share price until the supply and demand dynamics in the lithium market come back into balance.
As for when we might expect that, we turn to the experts at Citi.
What's ahead for the lithium price?
As The Australian Financial Review reports, Citi said it remains "very bearish" on lithium in the short term.
In what could heap even more pressure on the Core Lithium share price in the months ahead, the broker forecasts that lithium prices could fall by up to another 20%. That bearish assessment is based on observations that lithium inventories are increasing at a "dramatic pace".
While global demand for lithium is still growing this year, growth is only at half the pace we witnessed in 2023 amid a slowdown in EV sales. Citi estimates that lithium inventories have leapt by some 70,000 tonnes year to date.
According to Max Layton, Citi's global head of commodities research, "This high and rising low-shelf-life chemical inventories should see lithium prices fall another 15% to 20% to $US10,000 a tonne."
That won't come as good news to ASX lithium miners. Nor their shareholders.
However, the Core Lithium share price could be supported by investors with longer-term horizons, as the lithium glut is expected to begin easing next year.
According to Layton:
A low-price environment over the next three to six months would force supply curtailments, driving physical markets to rebalance… Lithium consumption is expected to accelerate from 2025 onwards once the current negative EV sentiment fades.
Citi has a sell rating on Core Lithium with a 9-cent share price target. That's right about where the stock is trading at today.
