Trading Economics data shows the lithium carbonate price has risen 24% over the past month, pushing some ASX lithium shares higher.
The lithium carbonate price is now at its highest point in 12 months at US$11,953.96 per tonne.
Trading Economics analysts explain the rise:
Lithium carbonate prices surged further toward CNY 85,000 per tonne in August, erasing this year's slump to the highest in one year as lower output from key mines countered oversupply worries.
The Chinese government pledged capacity cuts to major industries that have suffered from deflationary pledges in recent years, driving investors to bet on an outlook of lower lithium supply out of the world's top refined lithium producer.
The analysts said the world's top battery producer, Contemporary Amperex Technology Co. Ltd (CATL), suspended activity in its Jianxiawo mine after failing to get a permit extension.
The Jianxiawo mine produces about 5% of the global supply.
Oversupply has been a wet blanket for lithium prices over the past few years.
Last year, lithium production worldwide was 35% higher.
This was largely due to strong production in China, Indonesia, and the Democratic Republic of the Congo.
Many lithium miners have been reluctant to close down their mines, despite dramatically lower lithium prices, for fear of losing market share and key business relationships with governments and battery producers.
The 24% increase in the lithium carbonate price over the past month has led to mixed results among ASX lithium shares.
ASX lithium shares over the past month
Over the past month:
- Sayona Mining Ltd (ASX: SYA) shares are up 30%
- Mineral Resources Ltd (ASX: MIN) shares are up 16.4%
- Pilbara Minerals Ltd (ASX: PLS) shares are up 15.3%
- Core Lithium Ltd (ASX: CXO) shares are up 8.3%
- Lake Resources N.L. (ASX: LKE) shares are down 30%
- Liontown Resources Ltd (ASX: LTR) shares are down 9.7%
- Rio Tinto Ltd (ASX: RIO) shares are down 5.7%
- IGO Ltd (ASX: IGO) shares are down 1.7%
Top broker Citi warns that this month's run for the lithium carbonate price may be short-lived.
The Australian Financial Review (AFR) reports that Citi's commodity desk has told clients to start building "bearish exposure" to any further rallies in the lithium carbonate price.
Meanwhile, some new broker notes reveal what the experts think of some specific ASX lithium shares.
Let's take a look.
Recent broker ratings on ASX lithium shares
Liontown Resources Ltd (ASX: LTR)
Bell Potter maintains a speculative buy recommendation on this ASX lithium share with a reduced 12-month price target of $1.05.
On Friday, the Liontown share price closed at 84 cents. The broker's price target implies 25% potential upside from here.
Bell Potter says Liontown's 100% owned Kathleen Valley lithium project is highly strategic in terms of scale, mine life, and location.
Last week, Liontown announced the early closure of its oversubscribed share purchase plan (SPP), targeting $20 million.
The SPP followed a successful $266 million capital raise at 73 cents per share to fortify Liontown's balance sheet.
IGO Ltd (ASX: IGO)
On The Bull last week, Toby Grimm of Baker Young revealed his sell rating on IGO shares.
This ASX lithium share closed at $5.12 on Friday.
IGO owns lithium projects and the Nova nickel, copper, and cobalt operation in Western Australia.
Grimm comments:
IGO continues to hold a significant stake in Australia's premier lithium mine Greenbushes in Western Australia.
The ownership structure is a disadvantage for IGO, in our view, and its attempt to gain greater control via lithium hydroxide processing appears uncertain.
In our opinion, IGO carries outsized strategic risk, so we prefer other names in the critical minerals space.
IGO reports its next lot of results this Thursday, 28 August.
