ASX lithium stocks are ‘the buy now, pay later of 2022’: expert

ASX lithium shares have continued their ascent to stardom in 2022, with many names securing double and even triple-digit gains in the past year.

Lithium itself has been equally impressive. Despite a large selloff across broad commodity sectors, lithium has just ticked back to its highest levels on record – up 80% this year to date.

Trends are cyclical, experts say

Despite the recent strengths in lithium carbonate and spodumene pricing, it’s still important to consider that commodity markets move in cycles, based on global patterns of supply and demand.

That point is front of mind when considering the tidy gains some lithium purveyors have locked in this year.

Equity markets also move in cycles, based on similar drivers. Chief to the lengthy upside lithium stocks have enjoyed has been the surging demand for electric vehicles.

Such is the demand that, even in the midst of one of the deepest market drawdowns on record, investors continue to pile in, with some likening it to other frothy market trends of days gone by.

“It’s the buy now, pay later of 2022 — the one that everyone wants a piece of when the market is not that exciting,” Nabtrade’s Gemma Dale said, reported by The Age.

Anyone familiar with buy now, pay later (BNPL) shares will know the hypergrowth (and, arguably, equally as hyper fall from grace) that the sector experienced following its revolutionary debut in Australia.

Nevertheless, lithium stocks continue catching bids in H1 FY23.

This is seen in names such as Pilbara Minerals Ltd (ASX: PLS), Core Lithium Ltd (ASX: CXO), and Allkem Ltd (ASX: AKE) to name but a few, up 110%, 354% and 72.5% over the past 12 months of trade respectively.

What’s next for lithium?

As for the price of lithium, and where it heads next, all expectations are that it will remain top-heavy for some time to come.

“Data from the Shanghai Metals Markets pointed to a 108% surge in [lithium] carbonate imports in China, as the rebound in economic activity renewed demand for new energy vehicles,” Trading Economics said.

“In the US, demand for electric vehicles is set to increase as the newly passed ‘Inflation Reduction Act’ extends tax breaks for new electric vehicle purchases,” it added.

Meanwhile, an energy crisis in China stemming from “record-setting heat waves” has led numerous lithium producers in the country to suspend their operations for the time being, Trading Economics concluded.

The post ASX lithium stocks are ‘the buy now, pay later of 2022’: expert appeared first on The Motley Fool Australia.

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More reading

• Here’s the lithium price forecast through to 2024
• 5 things to watch on the ASX 200 on Tuesday
• The Core Lithium share price has soared 150% in 2022, but is the company actually producing?
• Here are the 3 most heavily traded ASX 200 shares on Monday
• Top broker tips lithium price to surge 86% over next 2 years

Motley Fool contributor Zach Bristow 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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