The ASX lithium stocks this broker thinks should be on your Christmas shopping list

One of the best regular summaries of the ASX lithium sector comes from broker Bell Potter (“BP”). Their “Eye on Lithium” note comes out roughly monthly, and as they suggest, it “reviews lithium commodity prices, ASX announcements and sector news”. If you’re a lithium bull, it might be worth throwing some business BP’s way to get your hands on this very handy update!

Here are a few interesting points from their latest Eye on Lithium sent out on Friday.

BP on China lithium markets:

• Chinese EV sales data “remains strong”.

• Despite this, there are reports of “pessimism” among “sizable” lithium carbonate buyers and this is a “reason to remain cautious”.

• "Several market insiders” expect continued weakness in the lithium hydroxide price (lithium carbonate can be processed into lithium hydroxide, which is used in battery cathode manufacturing).

• BP cites data from commodity price reporting agency Fastmarkets which suggests there will be a global surplus of “14kt LCE in 2023, compared with a 45kt LCE deficit in 2022 (“LCE” means lithium carbonate equivalent which is a commonly used term in the industry to explain the economics of various lithium minerals in one standardised term).

• Abundant new supply along with softer EV demand is the reason for the deficit.

• Spodumene concentrate demand “has fallen substantially”, and if the factors described above persist, it may “pressure producers to curtail production”.

• Guangzhou Futures Exchange (“GFEX”) has widened the allowable daily price range for lithium carbonate, and this could contribute to greater volatility in lithium prices

• Recent volatility could be caused by short covering as market participants speculate “near term prices might be nearly at a low”.

BP on ASX lithium stocks:

• BP has one of the widest coverage universes among local brokers. They presently have a “Buy” rating on Allkem (ASX: AKE), IGO (ASX: IGO), and Mineral Resources (ASX: MIN).

• They have a “Buy (Speculative)” rating on Azure Minerals (ASX: AZS), Delta Lithium (ASX: DLI), Green Technology Metals (ASX: GT1), Lake Resources (ASX: LKE), Latin Resources (ASX: LRS), and Liontown Resources (ASX: LTR).

• FYI, Pilbara Minerals (ASX: PLS) fans, BP presently has a “Hold” rating on your favourite stock!

• Observations on various ASX lithium companies’ unit cost guidance mid-points for FY24 (converted at AUD/USD $0.66): IGO US$201/t, PLS US$418/t, MIN Wodgina US$600/t & Mt Marion US$789/t, CXO US$794/t, SYA US$810/t, and AKE US$850/t.

BP on the lithium demand outlook:

Light vehicle sales & EV penetration outlook. Source: Bell Potter Securities, “Eye on Lithium”, 15 December 2023.

In the above table, BP shows their predictions for EV take up versus the decline of the internal combustion engine (“ICE”) out to 2040. In the next table, we can see how the expected ascent of EVs and corresponding demise of ICE vehicles may translate into demand for lithium minerals using LCE as a base. This is the key chart many lithium bulls have pegged their faith on: a case of short term pain for long term gain, perhaps?

Lithium demand outlook kt LCE. Source: Bell Potter Securities, “Eye on Lithium”, 15 December 2023.

FYI, if you are a lithium lover, make sure you check out our dedicated Lithium page which contains a comprehensive list of ASX-listed lithium stocks!