Investing in ASX lithium stocks has been anything but smooth recently. Unless investors were shorting these stocks, many are likely dealing with significant paper losses over the last year.
Several prominent lithium stocks, such as Arcadium Lithium (ASX: LTM), Core Lithium Ltd (ASX: CXO), IGO Ltd (ASX: IGO), Liontown Resources (ASX:LTR) Ltd (ASX: LTR), and Pilbara Minerals Ltd (ASX: PLS), have experienced substantial declines. This downturn has been driven by several factors:
- Oversupply of Lithium: An excess supply of lithium has flooded the market.
- Softer Than Expected Demand: Demand for lithium has not met expectations.
- Emergence of Low-Cost Lepidolite in China: The availability of cheaper lepidolite in China has further pressured prices.
As a result, weak lithium prices have squeezed the profits of lithium miners, making some operations unprofitable. For example, Core Lithium decided to suspend its mining operations indefinitely earlier this year due to profitability concerns.
What’s Next for Lithium Prices?
Let's explore the price forecasts for three widely used lithium types: lithium carbonate, lithium spodumene, and lithium hydroxide, based on analyses by Goldman Sachs (NYSE:GS).
Lithium Prices in 2023
- Lithium Carbonate (China): Averaged US$32,694 per tonne
- Lithium Hydroxide (China): Averaged US$32,452 per tonne
- Spodumene 6%: Averaged US$3,712 per tonne
Current Spot Prices vs. January 2023 Prices
- Lithium Carbonate (China): US$10,934 per tonne (January: US$11,867)
- Lithium Hydroxide (China): US$9,563 per tonne (January: US$9,899)
- Spodumene 6%: US$990 per tonne (January: US$1,000)
Lithium Price Forecasts Through 2027
Goldman Sachs does not foresee a significant improvement in lithium prices in the near future. Here are the projected average prices:
Lithium Carbonate (China)
- 2024: US$11,683 per tonne
- 2025: US$11,000 per tonne
- 2026: US$13,323 per tonne
- 2027: US$15,646 per tonne
- Long-term: US$15,500 per tonne
Lithium Hydroxide (China)
- 2024: US$11,463 per tonne
- 2025: US$12,500 per tonne
- 2026: US$14,323 per tonne
- 2027: US$16,146 per tonne
- Long-term: US$15,500 per tonne
Spodumene 6%
- 2024: US$995 per tonne
- 2025: US$800 per tonne
- 2026: US$978 per tonne
- 2027: US$1,155 per tonne
- Long-term: US$1,150 per tonne
Bottomline
Given these projections, only ASX lithium stocks with low production costs are likely to maintain profitable operations in the coming years. This outlook is a key reason why Goldman Sachs has a buy rating and a $7.15 price target for IGO Ltd. The broker recently highlighted IGO’s robust position in the market, driven by its cost-efficient operations and strategic planning, as a strong foundation for future profitability.