This trend could double already red-hot lithium demand

An emerging trend could dictate the immediate future for lithium.

A man wearing a suit holds his arms aloft with a smile on his face is attached to a large lithium battery with green charging symbols on it.

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

Key points

  • Demand for lithium may be twice what the market is expecting if swappable batteries became an industry standard, according to Macquarie
  • The potential trend is likely to put even more upward pressure on lithium prices, which are testing new highs this month
  • ASX lithium shares at the top of Macquarie's buy list are the Pilbara Minerals share price and the Mineral Resources share price

Booming demand for lithium could be twice as bad as experts are predicting if an emerging trend takes hold, according to a top broker.

Some electric vehicle (EV) industry insiders are betting on swappable batteries. If this is because of the industry standard, it could put upward pressure on lithium prices, according to Macquarie.

Swappable batteries for EV could be a major trend

Swappable vehicle batteries are seen as an ideal way to overcome "range anxiety". Instead of recharging, drivers can just exchange their batteries for a fully charged one.

The other advantage is that swappable batteries could lower the cost of purchasing an EV. This is because EVs may be bought without a battery and drivers could subscribe to a battery swapping service.

If the concept takes off, it would be great news for ASX lithium shares, according to Macquarie.

How swappable batteries can trigger demand shock

"Macquarie EV, battery materials, basic materials team recently had a deep dive into battery swapping and believed battery swapping could double battery demand esp. for ternary batteries, benefiting upstream battery materials, esp. cathodes, separators, lithium," said the broker.

Even as things stand now, lithium product prices in China have already reached new records in the first half of January.

Lithium prices reaching new highs

"Chinese spot technical and battery grade lithium carbonate prices (non-VAT adjusted) reaching new highs of Rmb342,500/t (~US$54,000/t) and Rmb358,500/t (~US$56,500/t), respectively," said Macquarie.

"Realised spodumene prices also increased further and broke US$2,690/t mid this week. Platts Battery Metals reported on 21st Jan that spot spodumene concentrate (6% Li2O) sales were being quoted around US$3,000/t (FOB, Australia), a new all-time high."

What is driving the strong prices is an expectation that demand from the US, EU and China will increase substantially due to the popularity of EVs in those key markets.

ASX lithium shares to buy

The adoption of swappable batteries will make the imbalance worse, although the crash in ASX lithium shares today is contradicting the strong outlook.

The Liontown Resources Limited (ASX: LTR) share price slumped 7.1%, Allkem Ltd (ASX: AKE) share price tanked 5%, and Pilbara Minerals Ltd (ASX: PLS) share price shed 2% at the time of writing.

But this could be a buying opportunity as Macquarie rates most of the ASX lithium shares as "outperform".

The broker's favourite picks are the Pilbara share price and the Mineral Resources Limited (ASX: MIN) share price.

Motley Fool contributor Brendon Lau owns Orocobre Limited. The Motley Fool Australia's parent company Motley Fool Holdings Inc. 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 Resources Shares

gold, gold miner, gold discovery, gold nugget, gold price,
Resources Shares

Northern Star share price slips despite positive quarterly results

Northern Star reports record first-half cash flow due to a strong operational performance and high gold prices.

Read more »

Engineer looking at mining trucks at a mine site.
Resources Shares

Down 11% and still trading under $125, is it time to buy the dip in Rio Tinto shares?

Are Rio Tinto shares a gold mine in 2025?

Read more »

Miner on his tablet next to a mine site.
Resources Shares

Which dates could move the Rio Tinto share price in 2025?

The ASX 200 mining giant has just released its financial reporting calendar for the new year.

Read more »

Business people standing at a mine site smiling.
Resources Shares

Which ASX 200 mining share will pay the best dividend yield in 2025?

Amid lower commodity prices and a weak Chinese economy, can the miners keep paying us big dividends?

Read more »

Woman looks amazed and shocked as she looks at her laptop.
Mergers & Acquisitions

How Rio Tinto shares could eclipse BHP in 2025, with a little help from Glencore

The financial rumour mill is abuzz about a potential mega merger for Rio Tinto.

Read more »

Upset man in hard hat puts hand over face after Armada Metals share price sinks
Resources Shares

Why this $6.5 billion ASX 200 mining stock is tumbling today

The ASX 200 miner just found itself under heavy selling pressure on Friday.

Read more »

Pilbara Minerals engineer with hard hat looks through binoculars at work site or mine as two workers look on
Resources Shares

Own Fortescue shares? Here are the dividend dates for 2025

Here are the important dates to diarise for Fortescue investors in the new year.

Read more »

A group of three men in hard hats and high visibility vests stand together at a mine site while one points and the others look on with piles of dirt and mining equipment in the background.
Resources Shares

What happened with the Core Lithium share price in 2024?

Core Lithium worked to expand its horizons in 2024.

Read more »