Top broker tips lithium price to surge 86% over next 2 years

It’s another positive day for some ASX lithium shares. At the time of writing, the Pilbara Minerals Ltd (ASX: PLS) share price is up 1% while its peer Core Lithium Ltd (ASX: CXO) is trading marginally lower.

Investors are expecting demand for lithium to keep rising over the long term.

With the world looking to decarbonise, lithium is seen as an important element in the production of batteries for electric vehicles and other large-scale battery solutions.

One of the world’s biggest miners, Rio Tinto Limited (ASX: RIO), has recently expanded into lithium with its Rincon lithium project acquisition for $825 million. At the time, the miner said:

The market fundamentals for battery grade lithium carbonate are strong, with lithium demand forecast to grow 25% to 35% per annum over the next decade with a significant supply demand deficit expected from the second half of this decade.

Stronger lithium price expected

According to reporting in the Australian Financial Review, the broker Barrenjoey is even more optimistic about the prospects for lithium.

Barrenjoey thinks the lithium price could rise by up to 86% over the next two years, thanks to ongoing tight market conditions which could continue into 2023. This, in turn, will have a flow-on effect, leading to larger net profit after tax (NPAT) figures and cash flows for lithium miners.

The AFR reported that Barrenjoey’s head of mining and metal Glyn Lawcock pointed to limited lithium supply as the major barrier to electric vehicle uptake.

Barrenjoey said Pilbara Minerals would be the one miner that benefits the most from higher prices for the commodity. The AFR reported the broker has increased its earnings per share (EPS) forecasts for Pilbara by up to 44% for FY23 and up to 120% for FY24.

Pilbara Minerals is bullish on the situation

The ASX lithium share’s FY22 result included some positive commentary about the future.

It said that lithium pricing remains “strong”, putting Pilbara Minerals in “prime position to capitalise on current market conditions, including the sale of spodumene concentrate”.

Pilbara Minerals is the 100% owner of the Pilgangoora project in Western Australia which, according to the company, houses one of the world’s largest deposits of hard rock lithium.

The company also expects the lithium deficit to worsen. By 2040, the expected lithium deficit could be an equivalent of around 18 Pilgangooras “with likely pricing implications”, it predicts.

Pilbara Minerals managing director and CEO Dale Henderson said:

The business is in an enviable position, supplying product into a burgeoning growth market with a clear pathway for further production growth off a performing operating base. Further, chemicals participation with our downstream JV with POSCO and our midstream project provides another extension of value creation for our shareholders. A very exciting future lies ahead for our business and our shareholders.

Pilbara Minerals share price snapshot

Over the last six months, Pilbara Minerals shares have risen around 64%.

The post Top broker tips lithium price to surge 86% over next 2 years appeared first on The Motley Fool Australia.

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More reading

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• 3 ASX All Ordinaries shares hitting all-time highs on Monday
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• Up, up, and away: Pilbara Minerals shares deal out another all-time high

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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