ASX Lithium Stocks: During the three months ending in June, the spot price of lithium carbonate increased by more than thirty percent, recouping a portion of the losses that were mostly caused by China’s restrictions on subsidies for electric vehicles in January. What does this mean for ASX Lithium Stocks?
During the course of the quarter, this caused a rise in the share prices of lithium producers in both Australia and the United States. However, according to broker research that was published this week, analysts at Goldman Sachs indicate that this trend will not continue.
Lithium prices are forecast to fall over the next 18 months and beyond, according to Goldman analysts Hugo Nicolaci, Paul Young, and Elise Bailey. As a result, these analysts support producers at the lower end of the cost curve who have more diverse companies and higher ability to increase output.
According to the latest research report that was published on Thursday, the analysts stated, “We see more limited upside in the lithium space on a 12-month view.”
While we anticipate that rising demand will help prop up lithium prices in the short term, we still anticipate a supply-led correction in the second half of 2023. An estimated US$1,350 per tonne for spodumene is factored into the current trading price of Australian lithium equities (ASX Lithium Stocks), which the analysts say is about 1.3 times their nett asset values.
Taking into account that Goldman has maintained its long-term forecast on share prices, this indicates that the market expects the present spot levels to last for more than 1.5 years.
The quantity of spodumene, a vital raw material for lithium carbonate, continues to be the fundamental factor in the expansion of the market. In addition to the 200,000 metric tonnes per year expected from China’s lepidolite capacity (another source of lithium) by the end of next year, Goldman expects this to add another 500,000 metric tonnes of lithium supply during 2023 and 2024.
The GS analysts also observed that other supply increases, such as Latin American projects and Direct Lithium Extraction, are expected to keep a lid on lithium pricing in the medium to long term.
For ASX Lithium Stocks investors, what does this mean?
“Despite recent price volatility, the Australian lithium sector has continued to outperform global peers, with a narrowing multiple discount,” noted Goldman Sachs analysts.
However, they stress the fact that Australian lithium stocks are increasingly reflecting global valuations, and that forecasts for lithium pricing in Australia and elsewhere are converging.
The following list of ASX lithium stocks, according to the experts at Goldman Sachs, has the greatest disparity between its share price valuation and that of its global competitors. They highlight, however, that global lithium equities’ potentially higher values may also stem from the companies’ increased vertical integration and exposure to brine assets with longer useful lives.
IGO (ASX: IGO)
Market cap: approx. AUD $11.5 billion
About: IGO owns and operates the Nova nickel-copper-cobalt operation, the Forrestania Nickel operation and the Cosmos Nickel operation – all in Western Australia. IGO is also invested in a lithium focused joint venture with our partner, Tianqi Lithium Corporation, which comprises a 51% stake in the Greenbushes Lithium Mine and 100% interest in a downstream processing refinery at Kwinana producing battery grade lithium hydroxide.
Pilbara Minerals (ASX: PLS)
Market cap: approx. AUD $15.4 billion
About: Pilbara Minerals is a leading ASX listed lithium company, owning 100% of the world’s largest, independent hard-rock lithium operation. Located in Western Australia’s resource-rich Pilbara region, our Pilgangoora Project produces a spodumene and tantalite concentrate.
Mineral Resources (ASX: MIN)
Market cap: approx. AUD $13.12 billion
Mineral Resources is an innovative and leading mining services company, with a growing world-class portfolio of mining operations across multiple commodities, including iron ore and lithium.
Allkem (ASX: AKE)
Market cap: AUD $10 billion
About: Allkem is a speciality lithium chemicals company with a global portfolio of diverse & high-quality lithium chemicals. Headquartered in Buenos Aires, Argentina our unique portfolio includes lithium brine operations in Argentina, a hard-rock lithium operation in Australia and a lithium hydroxide conversion facility in Japan.
