ASX lithium shares are dominating the leader board as several hit multi-year or record highs this afternoon.
The Pilbara Minerals Ltd (ASX: PLS) share price jumped 11.4% to its all-time peak of $2.34 in after lunch trade. This makes it the top performer on the S&P/ASX 200 Index (Index:^AXJO).
The Orocobre Limited (ASX: ORE) share price isn't far behind as it too set a record. The shares surged 11% to $9.52 while its merger mate, the Galaxy Resources Limited (ASX: GXY) rocketed by a similar amount to a decade high of $5.43 at the time of writing.
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Upgrade for all ASX lithium shares
ASX lithium shares have been outperforming other miners recently. While iron ore and gold have been on the nose, several experts are predicting that the world is facing a supply shortfall of the battery-making ingredient.
A decision by JPMorgan today to upgrade the whole ASX lithium sector is also probably contributing to the bullish sentiment.
Higher rates of return
"We raise our long term-lithium spodumene price from $650/t to $850/t (+31%)," said JPMorgan.
"This is the price required to generate a 20% IRR for a notional hard rock mine with 1% Li2O grade, 10yr life, and capital intensity of US$1,075/t.
"We believe this is the style of project that is needed from the late 2020s to satisfy perpetual supply/demand gap."
ASX lithium shares powering up on supply deficit
The broker also increased its long-term lithium hydroxide price by 12% to US$14,000 a tonne. This will also generate an impressive 20% internal rate of return (IRR) for a notional conversion plant.
JPMorgan's bullish view stems from its belief that there isn't enough lithium to meet demand for the foreseeable future. This is largely driven by the electrification revolution with households turning to electric vehicles and battery power storage.
Nearly half of all cars sold in 2030 will be electric
"We have rebuilt our [supply/demand] model which is still based off JPM's global equity team assumptions for auto sales, EV roll out, and battery capacity," explained the broker.
"The team expects total EV penetration of 45% in 2030, with battery electric vehicles (BEVs) at 21%.
"BEVs account for the vast majority of lithium demand due to greater battery size when compared to plug in hybrid & hybrid vehicles."
Best ASX lithium shares to buy now
This makes all lithium shares under JPMorgan's coverage a buy even as the sector outperforms.
The broker upgraded its recommendation on the Mineral Resources Limited (ASX: MIN) share price and Pilbara Minerals share price to "overweight" from "neutral".
But if it had to pick its favourite ASX lithium shares, this would be the IGO Ltd (ASX: IGO) share price, Galaxy share price and Orocobre share price. All three shares are rated "overweight".
