Lithium prices poised to continue lower, report says, but Janus sees bottom (NYSE:ALB)

Lithium prices are not expected to return to previous high levels reached in 2022 and early 2023 before 2025 due to rising supply, subdued Chinese demand and a lackluster U.S. electric vehicle market, Australia’s government said in a recent analysis.

Australia, which mined about half the world’s lithium in 2022, forecasts the spot price of spodumene will fall to $2,200/metric ton in 2025 from an estimated average of $3,840/ton last year, according to the report from country’s Department of Industry, Science and Resources.

Australia is forecast to increase spodumene production to 633K metric tons in 2025 from 386K tons in 2022, China is expected to more than double output to 373K tons next year from 166K in 2022, and Chile is seen growing to 227K tons from 162K over the same period.

Lower spot lithium prices may make electric vehicles and batteries less expensive but they could also hurt project investment and delay consumer acceptance.

But Janus Henderson Investors sees lithium as one of its top commodity bets for 2024, believing the pullback in lithium prices appears close to a bottom.

Daniel Sullivan, the firm’s head of global natural resources, thinks the lithium market may normalize in the early part of this year, creating conditions for a recovery.

He also expects more deals in lithium mining, especially in Australia; M&A activity worth more than US$1.3B was announced in the country’s lithium mining sector last year, up from just US$56.4M in 2022, and Sullivan expects “a lot more of that to happen.”

Potentially relevant stocks include Albemarle (NYSE:ALB), Sociedad Quimica y Minera (NYSE:SQM), Arcadium Lithium (ALTM), Piedmont Lithium (PLL), Lithium Americas (LAC), Standard Lithium (SLI), Sigma Lithium (SGML), Ioneer (IONR).

ETF: (LIT)