Anything related to lithium has been hot among ASX investors the past few years, but the price for the battery material has fallen off a cliff recently.
According to dailymetalprice.com, the per-kilogram price for lithium was in the $80s in December but sunk to the mid $20s by the start of this month.
Yikes.
Understandably that drop put downward pressure on ASX lithium shares during the first quarter of 2023.
So with so many investors reliant on such stocks in their portfolios, where is the battery ingredient headed this year?
The analysts at Firetrail Absolute Return Fund fired up their crystal ball this week to answer this dilemma:
Image source: Getty Images
What happened to the lithium price?
Firstly, the team pointed out that the world's second largest economy was to blame for the calamitous drop in the lithium price.
"After a stellar 2022, lithium prices have experienced a sharp reversal so far in 2023," read the Firetrail memo to clients.
"China's lithium prices are down around 70% year-to-date."
But the great news is that it seems to be turning around in the middle kingdom.
"Prices bottomed around $21/kg in April before starting to move higher again recently," the memo read.
"Sentiment is improving, inventory levels at downstream converters have fallen at the same time supply growth has disappointed."
What will happen to the lithium price?
We have all read many times how much lithium is, and will be, in demand in the coming years.
But the Firetrail team notes that it's not a simple matter for the miners to turn up production of the elusive mineral.
"Production misses from the likes of Mineral Resources Ltd (ASX: MIN), Pilbara Minerals Ltd (ASX: PLS) and others [continue] to highlight the complexity of ramping up and maintaining full rates of production."
But with the prices seemingly passing a trough, Firetrail analysts are predicting a bright outlook for the rest of this year.
"An acceleration of electric vehicle sales in China and battery production could provide upside to lithium prices in the second half of 2023."
Already the Pilbara share price is up around 26% over the past month in anticipation of a rebound in commodity prices.
