The Allkem Ltd (ASX: AKE) share price has fallen precariously into the red today.
Shares in the lithium explorer are currently sliding 8.61% lower to trade at $13.17 apiece, after touching an intraday high of $14.48 near the open.
Putting weight on Allkem's share price is the fact that materials is today's worst-performing sector. The S&P/ASX 200 Materials Index (ASX: XMJ) is down 1.09% at the time of writing.
Adding to this is that a good number of Allkem's ASX lithium share peers are also showing red this afternoon. Here's a snapshot of how they're doing as the market close draws near:
- Mineral Resources Limited (ASX: MIN) down 6.63%
- Core Lithium Ltd (ASX: CXO) down 5.65%
- Pilbara Minerals Ltd (ASX: PLS) down 7.1%
The broader market is also having a not-so-stellar session as the S&P/ASX 200 Index (ASX: XJO) is laying almost flat with a 0.19% gain for the day.
So why are lithium shares like Allkem performing poorly on Friday? Let's investigate.
Image source: Getty Images
What's going on with the Allkem share price?
Adding to the selling pressure on lithium shares like Allkem today is news that the lithium price may have hit a price ceiling, according to data from Trading Economics.
Prices for the commodity are creeping away from the recent high of CNY 600,000 per tonne on 11 November. It has since fallen 1.58% to CNY 590,500, effectively ending that lithium price rally.
The lithium commodity price has been on an enormous bull run year-to-date, gaining 113% during this period.
Supporting the price rise were subsidies for electric vehicles issued by the Chinese government, which were set to expire at the end of 2022. However, China Briefing reported in September that the government had exempted buyers of electric vehicles from paying vehicle purchase tax starting 1 January next year, lasting until 31 December.
Lithium commodity price could fall lower
These subsidies haven't stopped analysts at Goldman Sachs from giving the lithium commodity price a bearish outlook starting in 2023, however.
My Fool colleagues in the US noted last week that the bank believes the sale of electric vehicles is set to slow down next year, which could lead to an oversupply of lithium and thus put downward pressure on the commodity's price.
It was also noted that a cathode manufacturer in China was rumoured to have cut its production targets in anticipation of a slowdown in demand for its output.
So it appears the lithium commodity price is being hit from a couple of different angles, thus putting pressure on the share prices of lithium producers such as Allkem.
Allkem share price snapshot
The Allkem share price is up 26.8% year to date. That's beating the ASX 200 by a substantial margin, as the index is down 2.53% over the same period.
The company's market capitalisation is around $9.18 billion.
