We're now 27 days away from our social feeds being bombarded with glossy highlight reels accompanied by the wistful words, "And with that, the 2024 season comes to an end". For most ASX lithium shares, the jar of highlights to pull from looks rather barren for a second consecutive year.
Electric vehicle sales reportedly increased 26% in the first half of this year. Despite the EV demand, the price of lithium has weakened by 19% since the end of 2023. Persisting oversupply of the battery commodity has dragged on the sector, sending the market capitalisation of lithium miners down with it in 2024.
- Pilbara Minerals Ltd (ASX: PLS) is down 39% year-to-date
- Mineral Resources Ltd (ASX: MIN) has fallen 50%
- IGO Ltd (ASX: IGO) is 44% lower
- Liontown Resources Ltd (ASX: LTR) has dropped 59%.
However, the old saying goes, "It's always darkest before dawn". Are ASX lithium shares set to see daylight next year?
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The nuts and bolts of lithium in 2025
Companies that make their money from commodities are heavily skewed by the supply and demand of the material. We've seen this play out over the last couple of years as the price of lithium has crumbled by almost nine-tenths of its former glory.
It then goes without saying that where the lithium price goes next year is pivotal.
Opinions are divided on this. According to The Australian Financial Review, analysts over at Morningstar think lithium carbonate prices can leap to US$15,000 per tonne, implying an approximate increase of 50% from today's level.
S&P Global Commodity Insight's forecast is a more conservative estimate. The market data provider expects lithium carbonate to hover between US$9,924 and US$11,627 per ton throughout 2025. At least that would suggest no gut-wrenching falls over the next 12 months.
The team at UBS believes prices for the less-lithium-rich spodumene could rally 17% in 2025. It comes with the caveat that miners need to delay further growth projects for prices to rise, which may not pan out.
All price forecasts aside, UBS' point is an important one. The fate of the lithium sector for next year really boils down to one thing: Will demand exceed supply? For this to occur, either demand for lithium — predominantly from EVs — will need to surge or more producers will need to close their mines.
If more miners close and battery demand grows, the price of lithium could be off to the races.
Which ASX lithium shares are in the box seat?
Assuming the sector prospers, then it becomes a matter of owning the quality lithium companies.
Mineral Resources could prove a winner if Morningstar's team is on the money. The team are optimistic about the besieged mining services company reaching $64, an 81% upheaval in its share price if accomplished.
What about short-sellers' delight, Pilbara Minerals?
Canaccord Genuity has a $3.90 price target on Pilbara shares. Based on the current price of this ASX lithium share, there could be a 60% upside for this $7.3 billion lithium heavyweight. Even the lowest price target of $2.70 from Jefferies suggests ~11% worth of gains to be made in the year ahead.
