Lithium has clearly been the place to be on the ASX recently. Share in lithium producer Pilbara Minerals Limited (ASX: PLS) have continued their staggering run.
Pilbara shares have been some of the most traded on the ASX in recent weeks – the recent share price chart explains why.
The whole lithium sector has been under the spotlight, with strong gains from Vulcan Energy Resources Ltd (ASX: VUL), up 42% in the past month and a casual 2,445% in the past year.
What’s been driving the Pilbara share price higher?
Rather than any company-specific news coming from Pilbara Minerals, it’s largely the improved sentiment around lithium itself and how it might be in strong demand in the coming years.
According to an article out of the Australian Financial Review, analysts at JP Morgan are anticipating a 19% increase in demand for lithium over the next 10 years, fuelled by more demand for electric vehicles and batteries.
As a result, JP Morgan put overweight ratings on all ASX-listed lithium stocks that it provides coverage for. Among these were Pilbara Minerals, Mineral Resources Limited (ASX: MIN), Galaxy Resources Limited (ASX: GXY), IGO Ltd (ASX: IGO) and Orocobre Limited (ASX: ORE).
Growth not slowing down
Other research from S&P Global seems to paint a similar picture for the future of lithium.
It said that new vehicle sales in China continued their record growth in July and will likely keep lithium prices elevated in the second half of 2021.
For the first seven months of 2021, China’s total output and sales came in at 1.5 million and 1.64 million units, up 195.6% and 197.1%, respectively, compared with the same period last year.
Accelerated demand for electric vehicles is expected to lead to demand for other metals such as aluminium, copper, and battery metals.
Summary
If the thematic around lithium remains positive, I’d imagine players like Pilbara Minerals will stand to benefit significantly considering its competitive position here in Australia. It is however a price-taking commodity business, which isn’t something that appeals to me personally.
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