Are ASX lithium shares staging a comeback in 2021?

Why 2021 could be the comeback year for ASX lithium shares on the back of higher prices and expanding production.

| More on:
asx share price increase represented by golden dollar sign rocketing out from white domes of lithium

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

ASX lithium shares have truly tested the resolve of long-term shareholders after more than two years of negative returns.

The industry has been in survival mode since lithium prices spiralled lower after spot prices peaked in 2018. This was driven by an influx of producers and supply, on dwindling demand. 

In recent months, the Galaxy Resources Limited (ASX: GXY), Orocobre Limited (ASX: ORE) and Pilbara Minerals Ltd (ASX: PLS) share prices have staged epic recoveries, delivering triple digit returns from their lows late last year. 

But taking a look at the bigger picture, the Orocobre and Galaxy share prices are still down a respective 30% and 27% from their 2018 highs. Pilbara is the only player to be eyeing a record all-time high after surging more than 250% since October. 

Lithium prices hit a 14-month high

Fastmarkets cites that China's battery-grade lithium carbonate prices have hit a 14-month high due to continued tight supply and producers hiking up prices further. 

The turning point for lithium prices is significant following more than two years of tumbling prices. Since 2018, lithium carbonate and hydroxide prices slumped by more than 50%, slashing the once highly profitable ASX lithium shares. 

In the case of Galaxy, the company has previously traded at a price-to-earnings (P/E) ratio of just 10. But in the company's half-year ended 30 June 2020 results, it delivered a net loss of US$22 million. 

Back in FY18, the company was selling lithium concentrate for an average of US$927 per dry metric tonne (dmt). These prices fell to an average of US$502/dmt in FY19. And US$398/dmt in the most recent 30 June 2020 results. 

Pilbara is the latest ASX lithium share to update the market about improving prices. Its December quarter shipments update cited improved spodumene concentrate demand conditions, with lithium carbonate pricing up 35% to date from its lows in August 2020. 

ASX lithium shares positioned for the future 

ASX lithium shares have wasted no time in gearing up for higher lithium prices in the medium-long term. 

Galaxy holds three lithium assets. Two of which are aimed to start construction and commissioning in 2022. Galaxy moderated production settings on its flagship resource, Mt Cattlin, to 50-55% of capacity to adapt to market conditions. However, the miner is examining the potential to ramp up Mt Cattlin production to full capacity, subject to inventory levels and prices.

Similarly, Pilbara also has the ability to rapidly increase production in response to rising prices. 

Wondering where you should invest $1,000 right now?

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for over ten years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes could be the 'five best ASX stocks' for investors to buy right now. We believe these stocks are trading at attractive prices and Scott thinks they could be great buys right now...

See The 5 Stocks *Returns as of 30 April 2025

Motley Fool contributor Lina Lim has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Share Market News

Man standing on rock next to turquoise salt lagoon.
Share Gainers

Here are the top 10 ASX 200 shares today

The ASX 200 finally had a green session this hump day.

Read more »

gaming asx share price rise represented by slot machine paying jackpot
Broker Notes

What does Macquarie expect from Aristocrat Leisure shares when it reports on 14 May?

Here's what the broker is expecting from this gaming technology company next week.

Read more »

Man pointing at a blue rising share price graph.
Share Gainers

Guess which ASX 300 stock just rocketed 17%!

Investors are sending the ASX 300 stock soaring higher on Wednesday. But why?

Read more »

Broker written in white with a man drawing a yellow underline.
Broker Notes

Top brokers name 3 ASX shares to buy today

Here's what brokers are recommending as buys this week.

Read more »

A male investor wearing a blue shirt looks off to the side with a miffed look on his face as the share price declines.
Share Fallers

Why Aurizon, JB Hi-FI, Nuix, and Platinum shares are tumbling today

These shares are falling on hump day. But why?

Read more »

A young woman wearing overalls and a yellow t-shirt kicks one leg in the air showing excitement over the latest ASX 200 shares to hit 52-week highs
Share Gainers

Why Firefly, Kelsian, NAB, and Zip shares are roaring higher today

These shares are having a good time on hump day. Let's find out why.

Read more »

A man and woman sit at a desk staring intently at a laptop screen with papers next to them.
Opinions

Where I'd invest $5,000 in ASX 300 shares right now

These stocks look like excellent investments today.

Read more »

A man holding a cup of coffee puts his thumb up and smiles while at laptop.
Broker Notes

Goldman Sachs says these ASX 200 stocks are strong buys

The broker is feeling very bullish about these stocks. But why?

Read more »