Liontown Resources Ltd (ASX: LTR) shares have plunged to new 52-week lows on Monday, despite no market-sensitive news from the company.
At the time of writing, shares in the lithium miner are trading at just 77 cents apiece. Earlier in the session, they dipped even further to 76.5 cents before settling at the current level.
This brings losses for the year to more than 53%, at a time when the Australian stock market has been on fire.
Let's see what the situation is with Liontown shares.
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What's caused the slump?
The issue isn't unique to Liontown. The entire lithium basket has suffered in 2024, as the spot price of the battery metal slumped to its lowest level in three years.
Prices for lithium carbonate are now at CNY73,500 after hitting a high of CNY597,500 in October 2022. Since then, a supply glut, coupled with high input costs, has curbed market pricing.
That has raised "concerns of oversupply", according to Trading Economics.
Lithium miners and producers continued to expand capacity and hunt for new reserves, with market players expecting global supply to soar by nearly 50% this year. This magnifies the current supply surplus amid the fallout of battery gluts due to government subsidies for firms across the supply chain.
Additionally, hopes of eventual balance in the market drove Chile to signal it would aim to double output over the next decade.
Trade tariffs in the EU and US have added to the pressures, Trading Economics says:
Further adding to the bearish pressure, the EU put barriers on Chinese EV producers with tariffs of up to 38% in response to subsidies-supported dumping starting this week.
The measures added to sweeping tariffs from the US, which quadrupled duties on Chinese EVs to 100%, pushing against input materials for battery producers.
Is there hope for Liontown shares?
It doesn't appear to be all doom and gloom for Liontown shares. Bell Potter analysts see potential for a significant rebound despite the current slump.
The broker maintains a speculative buy rating with a price target of $1.90 per share on Liontown.
This suggests a potential upside of approximately 147% from the current price.
Bell Potter's confidence in Liontown stems from the strategic importance of the Kathleen Valley Lithium Project.
Liontown has made notable progress on the project, recently celebrating the first ore mined and the first truckload of spodumene concentrate dispatched from the site.
The company has secured offtake agreements with major electric vehicle (EV) and battery manufacturers, underlining the broker's thesis.
However, Bell Potter also acknowledges the high level of risk associated with Liontown shares, given the volatile nature of the lithium market and the project's early stage of development.
Liontown's Managing Director and CEO, Tony Ottaviano, was equally bullish. He said the "rapid progression" was key as the company "transition[s] from construction to production".
Goldman Sachs also sees potential upside for Liotnwown. Whilst it rates the stock a hold, it values the business at $1.15 per share, suggesting 49% upside potential at the time of writing.
Foolish takeaway
Liontown Resources is facing a tough market environment, but experts think the current share price could represent an opportunity for investors with a high tolerance for risk.
While brokers have high ratings on Liontown shares, the stock has been down almost 70% in the past 12 months.
What it does from here, only time – and the price of lithium – will tell.
