2021 has been a frustrating year for ASX lithium shares, Galaxy Resources Ltd (ASX: GXY), Pilbara Minerals Ltd (ASX: PLS) and Orocobre Limited (ASX: ORE) on the backdrop of an outstanding performance in late-2020.
However, April has so far been a solid month for ASX lithium shares, with share prices approximately 5% to 10% higher and within 20% of all-time highs.
Why ASX lithium shares hadn't been moving in 2021
The Galaxy, Orocobre and Pilbara share price more than doubled between October 2020 and February 2021. This was driven by a broad range of factors, including a surging Tesla Inc (NASDAQ: TSLA) share price, Joe Biden's stance on climate change, and higher lithium prices.
However, the rapid appreciation of ASX lithium shares might have priced in current and near-term tailwinds.
Broader weakness in lithium and renewable related sectors could also be a dragging factor. The Global X Lithium & Battery ETF (NYSEARCA: LIT) for example, fell more than 25% between 17 February and 25 March this year. This ETF invests in the full lithium cycle, from mining and refining through to battery production. The ETF's top 3 holdings include the world's largest provider of lithium for electric vehicle batteries. Namely, Albemarle Corporation (NYSE: ALB), Chinese lithium giant Ganfeng, and multinational electronics company Samsung.
Lithium prices continue to grind higher
Lithium prices have continued to push higher in March driven by an uplift in global demand. Fastmarkets provided the following commentary for recent lithium price movements:
- Asian seaborne lithium prices were steady against a backdrop of tight availability and firm demand. Meanwhile, Chinese suppliers have made aggressive offers for battery-grade lithium carbonate.
- Spot trades in domestic Chinese market remained slow with consumers conducting "hand-to-mouth" purchases, but supply continued to be tight.
- Europe, US battery-grade lithium spot prices continued to trend higher with deals reported at higher levels.
What's next for ASX lithium shares?
ASX lithium shares might continue to move sideways. However, the companies are looking to ramp up production and push development projects forward to take advantage of higher lithium prices.
For Galaxy, this has involved ramping up production at its flagship Mt Cattlin mine, which was previously lowered to 60% of nameplate capacity. The company is also advancing the development of its Sal de Vida lithium brine project.
Pilbara follows a similar but more cautious approach where its half-year results commented that "any increase in production capacity will only occur once there is clear evidence of a sustained improvement in customer demand and pricing to support investment decisions and capital commitments".
Despite its more cautious tone, Pilbara did in fact make a significant $201 million investment to acquire neighbouring lithium miner, Altura Mining Ltd (ASX: AJM) late last year.
