The lithium market has had its ups and downs over the past few years, but according to one of the broker reports I'm having a look at today, the outlook is now "strenuously bullish".
Shaw and Partners and Macquarie have both released new research reports naming their top picks in the lithium sector, which I'll run through shortly.
But firstly, why is sentiment trending positive at the moment?
Image source: Getty Images
Demand and supply under pressure
Shaw and Partners said in its research note that, "Between global supply curtailments, significant future battery energy storage demand and turbo-charged electric vehicle demand, the underpinning fundamental outlook for lithium remains long-term strenuously bullish''.
The broker has upgraded their lithium price forecast, and that has flowed through into increased target prices for the companies they are recommending.
In terms of the demand thematic, Shaw and Partners said global electric vehicle sales grew 6% to 1.6 million units in April, and grid-scale battery storage was growing at nearly twice this rate.
The lithium market was also under pressure due to under-investment in new mines.
As they said:
Years of sub-economic prices forced widespread curtailments, deferred expansions, and slashed exploration budgets. With mine development lead times of 7-10 years, supply simply cannot respond quickly as prices recover. High-quality, low-cost spodumene and brine deposits are geographically concentrated and increasingly depleted at surface. In a twist familiar to all copper followers, newer resources are deeper, lower grade, or located in jurisdictions with elevated sovereign and permitting risk.
Shaw and Partners are expecting lithium prices to remain elevated "well into 2028", underpinned by strong electric vehicle demand following the recent oil price shock.
ASX lithium companies in focus
In terms of specific companies, Shaw and Partners has upgraded Wildcat Resources Ltd (ASX: WC8) from a price target of $1.20 to $1.80, saying that with native title and a mining lease already in place, the company is "fast-tracking its world-class Tabba Tabba Lithium Project to achieve production during the current lithium price cycle''.
They have upgraded their price target for Global Lithium Resources Ltd (ASX: GL1) to $1.75 from $1.50, saying its Manna project is rapidly advancing towards production.
And they have also upgraded Pmet Resources Ltd (ASX: PMT) from $1.20 to $1.50, saying it is advancing the Shaakichiuwaanaan Project in Quebec.
Meanwhile, Macquarie has an outperform rating on IGO Ltd (ASX: IGO) with a price target of $9.50, and PLS Group Ltd (ASX: PLS) with a price target of $6.20.
Macquarie said:
IGO remains our preferred exposure, with cash flow yields screening attractively across price scenarios in FY27–28. We also see upside to 4QFY26 production results. For PLS, the P2000 capex plan remains a key focus, with further clarity expected at the upcoming 4Q and FY26 results. Against a backdrop of rising diesel and steel prices, management of capex escalation will be critical.
