ASX lithium shares are off and racing today. What’s behind the boost?

a man sits on a rocket propelled office chair and flies high above a citya man sits on a rocket propelled office chair and flies high above a city

It’s been a pleasant start to the week for the S&P/ASX 200 Index (ASX: XJO) as trading kicks off this Monday morning. At the time of writing, the ASX 200 has put on a healthy 0.67%, lifting the index above 7,268 points. But let’s talk about ASX lithium shares.

Lithium stocks seem to be one of the areas of choice today. Most are having a stunning start to the week. Take the flagship ASX lithium share Pilbara Minerals Ltd (ASX: PLS). Pilbara shares are currently up by a happy 5.45% at $4.64 each:

Core Lithium Ltd (ASX: CXO) is also doing well, up 5.1% at $1.01 a share. Liontown Resources Ltd (ASX: LTR) is a little more muted so far today but still has added a robust 1.75% at $2.90 a share. Meanwhile, Lake Resources NL (ASX: LKE) has stormed 4% higher to 52 cents a share.

So what’s going on in the lithium space that is seeing these ASX lithium shares lead the ASX 200’s winners so far this Monday?

Why are ASX lithium shares on fire this Monday?

Well, there’s no concrete reason we can point to, unfortunately. However, there is some discussion out there that might explain why ASX lithium shares are having such a cracker day.

According to reporting in the Australian Financial Review (AFR) this morning, ASX broker Morgan Stanley has come out and stated that it believes lithium markets have hit a “turning point” following recent weakness in the sector.

As my Fool colleague Brooke noted last month, lithium prices have been on the slide over most of 2023 so far. This slump has been driven by falling demand for electric vehicles in the Chinese market, thanks to the winding up of government subsidies.

But Morgan Stanley noted that “China carbonate prices have bounced 30 per cent from their lows, and hydroxide prices have rebounded by 20 per cent”.

Here’s what Morgan Stanley commodities strategist Marius van Straaten had to say:

The turning point in lithium markets? Yes, it looks like that for now at least…

Although China’s electric vehicle sales and battery production are back in growth mode after a lacklustre start of the year, cathode and battery cell producers are still not fully back buying in the spot market, but sentiment is clearly improving, and their lithium inventories appear to have eroded.

The broker sees lithium prices becoming tighter over the remainder of the 2023 calendar year.

So this sentiment might be behind the strong showing that we are seeing with most ASX lithium shares so far this Monday. Let’s see how this popular but volatile corner of the ASX market fares over the rest of the week.

The post ASX lithium shares are off and racing today. What’s behind the boost? appeared first on The Motley Fool Australia.

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