The battery metals trade continues to extend its legs in 2022, with lithium carbonate still trading at all-time highs of A$109,786 per tonne on Thursday.
This continues a strong rally that started back in May, alongside several ASX lithium shares which have participated in the growth story.
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Demand-supply mismatch still key growth driver
Chief to the upside in lithium pricing over the past two years is the asymmetry in demand for electric vehicles (EVs) and the supply of battery metals to fulfil this mandate.
Recent government policy in both China and the USA – two of the largest EV markets – also supports the buying of EVs, and this has spurred additional growth for the sector in 2022.
As such, there's a significant mismatch in the demand-supply equation for battery metals, and this places ASX lithium producers front and centre to capitalise on the opportunity.
The chart below shows the returns of Pilbara Minerals Ltd (ASX: PLS), Allkem Ltd (ASX: AKE), Sayona Mining Ltd (ASX: SYA), and Lake Resources NL (ASX: LKE).
As seen, the price action for the 'basket' has been cyclical over the past 12 months, responding well to each major upshift in the lithium price.
Whereas other commodity baskets have receded to pre-pandemic levels, the market pricing for lithium has seen these key ASX players catch a strong bid since July.
It is this kind of market strength that continues to result in ongoing investment in the lithium sector.
For instance, today, Lake Resources announced that WMC Energy has obtained a strategic 10% stake in the company for a $1.20 per share consideration.
Aside from the investment, the deal also includes an offtake agreement with Lake at its Kachi Project, in Argentina.
The news was a good result for the ASX lithium share, which finished up 2% on the day following the announcement.
Meantime, each of the ASX lithium shares mentioned finished in the green today. Pilbara Minerals ended the day 5.7% higher, Sayona Mining was up 4.3%, and Allkem climbed 1.8%.
