After a difficult few months across the middle of the year, lithium prices are once again on the rise, putting a booster under Australian-traded lithium shares, which are regularly among the largest movers on the S&P/ASX 200 Index (ASX: XJO).
But not all lithium producers are created equal, which is where it helps to get a bit of insight from the professionals.
New lithium cycle has begun
The team at Macquarie have just released a new Critical Minerals Chronicle, with the cautionary subtitle: Cool heads required in a heating lithium market.
They were bullish on lithium, which is widely used in the production of batteries, and went on to say:
As highlighted in our September note, we identified early signs of a new lithium cycle, driven by a widening imbalance between supply and demand. This constructive view has been validated by the market over the past two months, evidenced by continued inventory drawdowns and a steady increase in spot spodumene prices.
That said, some lithium shares were running a bit too hot, the Macquarie analysts said, with Pilbara Minerals Ltd (ASX: PLS) and Mineral Resources Ltd (ASX: MIN) both trading at implied lithium prices which were higher than current levels.
Macquarie has a neutral rating on Pilbara Minerals and an underperform rating on Mineral Resources.
The shares it rates as outperform in the sector are IGO Limited (ASX: IGO), Elevra Lithium (ASX: ELV) and Patriot Battery Metals Ltd (ASX: PMT).
Among other shares, it has a neutral rating on Atlantic Lithium Ltd (ASX: A11) and an underperform rating on Liontown Resources Ltd (ASX: LTR)
Mine restart possible
One company not covered by the Macquarie research note is Core Lithium Ltd (ASX: CXO), which on Monday hit a new 12-month high of 22 cents.
The company didn't release any news on Monday, but said recently in its quarterly activity report that it was biding its time on a decision to restart operations at its Finnis mine in the Northern Territory, where it currently has a small team maintaining the mine.
The company's chair Greg English recently said:
We are not yet at a point where the board could consider restarting the operation, which I appreciate is a key focus for Core Lithium shareholders. Any decision in this regard remains subject to market conditions and securing an attractive project financing solution in the ongoing strategic process, amongst other factors. As I mentioned, there have been some recent signs of improvement in sentiment towards lithium which we would like to see continue.
