The market may be climbing higher again today but the same cannot be said for the lithium industry.
Once again on Friday, the ASX 200 lithium shares are under pressure and dropping into the red.
Here's a summary of how they are performing today:
- The Allkem Ltd (ASX: AKE) share price is down 2.5%
- The Core Lithium Ltd (ASX: CXO) share price is down 4%
- The Liontown Resources Ltd (ASX: LTR) share price is down 4%
- The Pilbara Minerals Ltd (ASX: PLS) share price is down 1%
Why are ASX 200 lithium shares being sold off?
Investors have been hitting the sell button this week after Goldman Sachs warned that lithium prices could be heading materially lower from the second half of next year.
As covered here, the broker is forecasting the following for lithium prices:
- Lithium carbonate
- 2022 US$59,331
- 2023 US$53,300
- 2024 US$11,000
- 2025 US$11,000
- Lithium hydroxide
- 2022 US$67,240
- 2023 US$58,015
- 2024 US$12,500
- 2025 US$12,500
- Spodumene 6%
- 2022 US$4,233
- 2023 US$4,330
- 2024 US$800
- 2025 US$800
Why might lithium prices crumble?
While Goldman expects lithium demand to grow strongly, it is forecasting supply to grow even quicker. This is expected to lead to an oversupply of the white metal by 2025. At that point, the broker expects global lithium demand to be ~1,300kt LCE but lithium production to hit ~1,700kt LCE.
Goldman expects this to be driven by a large increase in production both inside and outside of China. It explained:
Over the last two years, we have seen an increasingly supportive policy environment for electric vehicles from extended subsidies in China to the Inflation Reduction Act in the US which is supporting supply growth through joint ventures between OEM's (original equipment manufacturers) and junior miners. We estimate ex-China lithium supply to grow 48% vs. a Chinese supply growth of 37%, which combined will add 221kt LCE of supply over 2023 and then 312kt in 2024.
