Lithium might be back but the ride will be wild

There’s been some violent gyrations in lithium markets over the past couple of weeks but sentiment appears to be turning.

Has lithium truly begun its 'next cycle'? If so, strap in. Pic via Getty Images

There’s been some violent gyrations in lithium markets over the past couple of weeks but sentiment appears to be turning.

Liontown Resources (ASX:LTR) managing director Tony Ottaviano pointed out on Tuesday that spodumene futures had surged by US$60 per tonne on Friday but then dropped by US$50/t on Monday.

“Notwithstanding that, we’ve seen some green shoots in the past two weeks,” he said.

Pilbara Minerals (ASX:PLS) managing director Dale Henderson is cautiously optimistic.

“There are signs the lithium winter may be lifting, but it's early in this change,” he said yesterday.

“The lithium market has long been marked by volatility, with prices prone to sharp and sometimes counterintuitive swings.

“The volatility is not incidental. It reflects a still nascent market with limited liquidity, few futures mechanisms and undeveloped trading infrastructure. Pricing remains inefficient.

“In this environment, short term moves are often driven by sentiment, policy signals or speculative flows, rather than durable shifts in supply and demand.”

Henderson pointed that the price had sunk to levels over the past year that made much of the global lithium sector unprofitable.

“This was not the result of a fundamental oversupply alone, but an immature market that remains in development,” he said.

“The recent price rally, which began late in the June quarter and accelerated into July, follows this pattern, a sentiment-led rebound triggered by perceived supply risks.

“In this case, Chinese regulatory reviews of brine and lepidolite operations and the suspension of a major project fuelled renewed price momentum.”

According to reports, eight lithium mines in Jiangxi are being scrutinised, which could potentially lead to suspensions.

Shanghai Metals Market’s baseline forecast for August was a 300 tonne surplus, but it suggested even limited disruptions could reduce monthly supply by 2000-2500t.

In the case of moderate disruption, meaning a temporary suspension of Jiangxi mines, the impact would be 8000-10,000t in August, easing to 5000t a month by the December quarter.

If mines are completely shut down, it forecasts a 10,000t impact to supply in August, escalating to 14,000t a month by the end of the year.

“Now, we remain cautiously optimistic but continue to monitor whether the flagged supply side adjustments will eventuate,” Henderson said.

Picking the bottom

Joe Lowry, the US-based founder of advisory Global Lithium, believes the lithium winter has ended.

“I believe the market has bottomed and we’ve started the next cycle,” he said in a video posted to X.

IGO boss Ivan Vella yesterday seemed less convinced, commenting on the unseasonably cold winter in Perth this year and comparing it to the lithium winter.

“I suspect it’ll warm up in Perth a lot before we see a real shift in the lithium market,” he said.

Henderson cautioned it was a partial correction at this stage and not yet a full recovery and prices still remained well below the levels needed to incentivise new production.

“While near-term pricing is volatile, the long-term demand picture remains robust and continues to strengthen,” he said.

He said global electric vehicle sales reached five million units in the June quarter, up 27% year-on-year, while EV penetration hit 50% in China in June and 25% for the rest of the world.

Energy storage system demand is also building.

“Forecasts indicate 40% year-on-year growth for ESS in this calendar year alone,” Henderson said.

“Together, EVs and ESS are expected to account for something like 90% of lithium demand by 2030, highlighting a powerful and durable and structural demand trend.”

Late last week, Canaccord Genuity analysts conceded that demand was much stronger than it expected and low pricing had hollowed out future supply growth.

“As demand growth overtakes supply growth, we see a much tighter market and potential for continued pricing improvements,” the firm’s research team, led by Reg Spencer, said.

“There still appears to be oversupply today, but we think demand growth is rapidly eating into this. By 2027, additional will supply be needed and in the absence of higher incentive levels, this could elicit a more dramatic pricing response.

“We think the down cycle in the sector has now likely passed and see lithium equities as set to benefit.”

What about juniors?

The renewed optimism has flowed down into the junior space.

Explorer Perpetual Resources (ASX:PEC) has more than doubled this month after completing the maiden drill program at its Igrejinha project in Brazil’s “Lithium Valley”, which is also home to PLS’ advanced Colinas development project.

Canadian players Patriot Battery Metals (ASX:PMT) and Green Technology Metals (ASX:GT1) have surged, with each adding critical minerals components to their lithium resources.

Western Australian junior Global Lithium Resources (ASX:GL1) is up by more than 45% over the past month, while fellow WA explorer Delta Lithium (ASX:DLI) is up by more than 25% over the same period.

Argentina-focused Pursuit Minerals (ASX:PUR) is up 24% this month and managing director Aaron Revelle last week told Stockhead he could feel the change in sentiment on the ground.

“There’s more inbound interest, especially those looking to secure supply outside of China,” he said.

“Juniors with pilot scale production, strong grades, and a clear pathway to development are getting a second look. It’s cautious optimism, but the tone has improved from earlier this year.”

Astute Metals (ASX:ASE) is taking advantage of the 20% rise in its share price over the past few days to raise fresh capital to continue advancing its Red Mountain lithium project in Nevada.

It comes after the company reported high-grade hits of 62.4m at 1210 parts per million lithium from 152.2m, including 27m at 1420ppm lithium and 33.8m at 1130ppm lithium from 34.8m, including 10.7m at 1320ppm lithium on Friday.

The results will underpin an initial resource estimate to be reported by the end of the year.

Meanwhile, Chariot Corporation (ASX:CC9) is positioning itself for the recovery and China’s strong demand by picking up new ground.

Earlier this month, the company picked up the largest portfolio of lithium assets in Nigeria, which managing director Shanthar Pathmanathan described as a global lithium hot spot.

At Stockhead, we tell it like it is. While Perpetual Resources, Green Technology Metals, Delta Lithium, Pursuit Minerals and Chariot Corporation are Stockhead advertisers, they did not sponsor this article.

Originally published as Lithium might be back but the ride will be wild