With sky high fuel prices expected to accelerate the already rapid shift to electric vehicles, demand for lithium looks set to continue to increase strongly in the coming years.
This bodes well for prices of the battery making ingredient and the companies mining the white metal.
With that in mind, let's take a look at two ASX lithium shares that have been rated as buys and tipped to shoot notably higher from current levels. They are as follows:
Allkem Ltd (ASX: AKE)
The first ASX lithium share to look at is Allkem. It is a top five player in the industry following the merger of Galaxy Resources and Orocobre last year. Allkem has a portfolio of high quality operations and projects across a range of locations and is already benefiting greatly from high lithium prices.
Morgans is very positive on Allkem and recently named the company as its top pick in the sector. It has an add rating and $14.83 price target on the company's shares. This compares to the latest Allkem share price of $10.46.
Morgans commented: "AKE is a pure play lithium producer with diversified products (spodumene, LiCO and borax) and geographies (WA and Argentina) that is set to expand. The almost completed Naraha plant will allow AKE to grow vertically into the lithium hydroxide market, supported by increased Argentinian brine production."
"The lithium market has seen strong price increases in CY21 but we don't see signs of a break to this momentum yet. We expect EV demand to remain strong with geopolitical events and a potentially tight oil market accelerating the shift towards electrification," it added.
Vulcan Energy Resources Ltd (ASX: VUL)
Another ASX lithium share to look at is Vulcan. It is the Germany-based lithium developer behind the massive Zero Carbon Lithium Project. Management notes that this is Europe's largest lithium resource and large enough to satisfy Europe's lithium needs for many years to come.
While it is not yet producing lithium, management is aiming to commence production in 2024. At which point, it has signed away huge volumes of lithium already to eager buyers.
This went down well with Germany-based broker Alster Research. It currently has a buy rating and $25.00 price target on the company's shares. This compares to the latest Vulcan share price of $9.10.
It commented: "By finalizing the deal with LGES, Vulcan has now five definitive agreements with high-profile customers. We consider this as a clear sign for the high demand for battery metals from the phasing out of the combustion engine. At this point, Vulcan has marketed its initial production volumes for the first 5-6 years."
"In the near term, we expect the admission to FSE as a catalyst for the stock, as future capital increases will be accessible to a broader audience. Thus, liquidity and interest will most likely increase. We confirm our PT of AUD 25.00, equivalent to EUR 15.81, and reiterate our BUY recommendation," Alster added.
