From mid-2021 through to November 2022, the lithium price rise was nothing short of meteoric.
Investors who bought S&P/ASX 200 Index (ASX: XJO) lithium shares like Pilbara Minerals Ltd, (ASX: PLS) Core Lithium Ltd (ASX: CXO) and Liontown Resources Ltd (ASX: LTR) near the beginning of that cycle and sold near the end will have banked some eye-popping gains.
The Core Lithium share price, as one example, soared more than 560% over that 18-month period.
But, as you're likely aware, the lithium price then headed the other direction.
And just as quickly.
The price for spodumene, a lithium rich mineral, has collapsed by more than 85% over the past 12 months. Spodumene 6% (meaning it contains at least 6% lithium) is now trading below US$1,000 per tonne, down from around US$7,600 per tonne in January 2023.
With the lithium price in freefall, ASX 200 lithium stocks have seen their previously soaring share prices hammered.
And the miners have been taking steps to conserve cash amid plunging revenues.
In January, Core Lithium announced it was temporarily halting mining operations at its Finniss lithium project.
Meanwhile, Liontown has chosen to delay the expansion of its Kathleen Valley lithium project.
And Pilbara Minerals, which delivered its first two dividends in 2023, is looking at suspending those payouts in 2024.
With that in mind, when can investors in ASX 200 lithium shares like Core Lithium, Pilbara and Liontown expect to see a bottom in the scorched lithium price?
Image source: Getty Images
What's ahead for the lithium price?
Investors hoping for a rapid turnaround in spodumene prices are likely to be disappointed.
Bank of America senior commodities strategist Michael Widmer noted (quoted by The Australian Financial Review), "We are concerned that lithium has not yet found a bottom."
Widmer slashed his forecast for spodumene prices in 2024 by 63% to US$650 per tonne. He reduced his forecast for 2025 to US$1,438 per tonne, down from his previous expectations of US$2,188.
That would see the lithium price continue to slide this year before rebounding above current levels in 2025.
Goldman Sachs recently released a more bearish forecast for 2025, though the broker is slightly more optimistic about its outlook for 2024.
Goldman expects spodumene prices of US$1,175 per tonne in 2024, which it then forecasts will fall to US$800 per tonne in 2025.
Why is Bank of America bearish on the near-term outlook for spodumene?
Commenting on why he expects the lithium price to fall further in 2024, Widmer said, "Operators have been reluctant to curtail production, the project pipeline is well filled, and we continue to expect very high surpluses. This should keep the pressure on prices for now."
He added that, "Western producers keep pushing ahead on expectations that lithium demand will expand thanks to [government] policies."
Those include the Inflation Reduction Act in the United States and potential tax incentive extensions for lithium producers in Australia.
On the demand side, a global slowdown in the growth rate of EV sales isn't helping the lithium price turn around either.
According to Widmer (quoted by the AFR):
Further investigation reveals a dichotomy in the EV market: the premium market has moved towards electrification, while mass-market adoption lags. This divergence is mostly driven by pricing, but EV prices are unlikely to converge with [internal combustion engines] in the near term… EV production keeps expanding, albeit at a slower pace.
So, when can investors in ASX 200 lithium shares expect the lithium price to run higher again?
Keep an eye on those production scalebacks.
"Eventual announcements of lithium production cuts will be key to a price rebound," Widmer said.
