ASX 200 lithium shares Galaxy Resources Limited (ASX: GXY), Pilbara Minerals Ltd (ASX: PLS) and Orocobre Limited (ASX: ORE) have continued to rally in 2021, all up by more than 20% in the past month.
From a year-to-date perspective, both Pilbara and Galaxy have just crossed the 100% return mark, while Orocobre is up about 85%.
So, what exactly is driving these ASX 200 lithium shares to record highs?
ASX 200 lithium shares surge on higher spot prices
The backbone for any commodity producer is the spot price.
Higher iron ore spot prices have helped drive BHP Group Ltd (ASX: BHP) and Fortescue Metals Group Limited (ASX: FMG) to all-time highs this year.
Conversely, weaker gold prices have seen gold miners such as Evolution Mining Ltd (ASX: EVN) and Newcrest Mining Ltd (ASX: NCM) struggle to outperform.
In the case of lithium, Orocobre's June quarterly results are a good example of just how far lithium prices have come.
In the June quarter, Orocobre was receiving US$8,476/tonne for its lithium carbonate, up 45% on the March quarter.
But it was just a year ago that the company was receiving US$3,913/tonne while its cost of sales was US$3,920.
Orocobre and other ASX 200 lithium shares have all experienced a huge jump in margins thanks to the recent rebound in lithium prices.
Big players want in on the lithium party
ASX 200 lithium shares aren't the only ones hogging the hype around the lithium sector.
On 28 July, Rio Tinto Limited (ASX: RIO) announced a $2.4 billion investment to "strengthen its portfolio for the global energy transition".
This investment will see Rio Tinto take the initial steps to bring its Jadar lithium-borates project online by 2026.
By 2029, Rio Tinto believes it could be one of the top ten lithium producers in the world.
Another positive headline for ASX 200 lithium shares
The lithium industry has been supported by a number of environmental goals amongst major economies to reduce emissions and produce renewable energy.
On Friday, Reuters reported another potential win for the lithium industry.
The White House is in discussions with US automakers on electric vehicle sales targets as part of the Biden administration's proposed revisions to vehicle emissions standards.
According to Reuters, a voluntary target of at least 40% of new vehicle sales being electric by 2023 could be set as early as next week.
