Orocobre (ASX:ORE) share price rebounds from broker downgrade

The Orocobre Limited (ASX: ORE) share price is fighting back after it got hit with a broker downgrade as Galaxy Resources Limited (ASX: GXY) surges

| More on:

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

The Orocobre Limited (ASX: ORE) share price is fighting back after it got hit with a broker downgrade.

The Orocobre share price tumbled more than 3% in early trade but bounced to be up 0.7% at $5.59 at the time of writing.

In contrast, the S&P/ASX 200 Index (Index:^AXJO) shed 0.3% of its value as mining, energy and property shares weighed.

Why JPMorgan downgraded the Orocobre share price

The positive sentiment towards all-things lithium can't be easily turned off even as JPMorgan cut its recommendation on the Orocobre share price to "neutral" from "overweight".

This isn't to say that the broker has a negative take on the mineral. If anything, it believes supply will quickly tighten as demand for electric vehicles revs up.

The issue is the rapid rise of the Orocobre share price, which surged by over 150% in the past year.

Hard to cool the lithium fever

But perhaps enthusiasm towards the Galaxy Resources Limited (ASX: GXY) share price today is lifting all boats in the lithium bay.

The Galaxy share price charged up 9.1% to a near three-year high of $3.26 during lunch time trade. Shares in the spodumene producer is running hot after management issued a positive update this morning.

Two drivers for the rocketing Galaxy share price

But this may not be the only news boosting the stock. JPMorgan has upgraded its price forecast for spodumene but left its estimates for lithium chemicals unchanged.

"We have increased spodumene prices a further 5-10% with reports of recent trades above US$600/t," said the broker.

This is good news for Galaxy but has no impact on the Orocobre share price as the latter produces lithium carbonate from brine from its joint-venture Olaroz lithium project in Argentina.

Differences in how lithium is mined

Spodumene occurs as crystals in hard rock and can be used to produce lithium carbonate or lithium hydroxide. The latter is becoming more highly prized by battery producers, reported newagemetals.com.

But regardless of where lithium comes from, most experts agree that global supply will struggle to keep up with expected demand for EVs. We could see shortfalls of the mineral as early as 2023.

This is the main reason why ASX lithium shares have been on a tear, although the speed of their ascend could cause concern.

Foolish takeaway

Few would think a bubble is forming but the risk is rising. Also, we shouldn't forget the saying in commodity markets – that nothing cures high prices like high prices.

It means that high spodumene and lithium carbonate prices will spur miners to ramp up production via brownfield or greenfield projects.

The undersupply issue may not last as long as some ASX investors believe.

Motley Fool contributor Brendon Lau owns shares of Galaxy Resources Limited and Orocobre Limited. Connect with me on Twitter @brenlau.

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

A man sits in despair at his computer with his hands either side of his head, staring into the screen with a pained and anguished look on his face, in a home office setting.
Share Fallers

Why EML, GQG Partners, IGO, and Integrated Research shares are sinking today

In afternoon trade, the S&P/ASX 200 Index (ASX: XJO) is on course to record a strong gain. At the time of…

Read more »

Man drawing an upward line on a bar graph symbolising a rising share price.
Share Gainers

Why EOS, News Corp, Polynovo, and Pro Medicus shares are roaring higher today

These shares are starting the week positively. But why?

Read more »

A couple stares at the tv in shock, one holding the remote up ready to press.
Mergers & Acquisitions

Telstra share price climbs amid $3.4b Foxtel sale

Who is buying the Foxtel business? Let's find out.

Read more »

A young man pointing up looking amazed, indicating a surging share price movement for an ASX company
Share Market News

Brokers say these ASX 200 growth stocks could rise 50% to 70%

Analysts think these shares could be dirt cheap and destined to generate big returns.

Read more »

Two people having a meeting using a laptop and tablet to discuss Seven West Media's balance sheet
Broker Notes

Why these ASX shares could be top SMSF options in 2025

Analysts are bullish on these high-quality shares. Let's find out why.

Read more »

The words short selling in red against a black background
Share Market News

These are the 10 most shorted ASX shares

Let's see which shares short sellers are targeting this week.

Read more »

Smiling man with phone in wheelchair watching stocks and trends on computer
Share Market News

5 things to watch on the ASX 200 on Monday

A good start to the week is expected for Aussie investors. Here's what to watch.

Read more »

A businessman compares the growth trajectory of property versus shares.
Opinions

What's the outlook for shares vs. property in 2025?

The experts have put out their new year predictions...

Read more »