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Last year saw many ASX growth shares turn it around after a period of malaise.

Now, in 2024, the market is looking forward to interest rates stabilising and maybe even a rate cut or two.

The team at ECP Growth Companies Fund recently named a pair of stocks it’s backing for outperformance this year:

No need for a capital raise

Virtual network provider Megaport Ltd (ASX: MP1) has already kicked off 2024 in the right way.

“Megaport outperformed in January as the company released their 2Q numbers late in the month,” read the ECP memo to clients.

That update was as bullish as ECP analysts predicted, but it was apparent others weren’t thinking the same way.

“While the result was in line with our expectations, the positive share price reaction on the day suggested the market was positioned differently.

“Free cash flow increased over the quarter, leading to a significant increase in the cash at bank, further allaying concerns regarding the need for a capital raise.”

Even after a sensational 12 months in which the Megaport share price more than doubled, the business had future potential galore for the long-term investor.

“While the opportunity to further monetise their network fabric remains immense, it will take time.”

According to CMC Invest, 10 out of 15 analysts currently agree with the ECP team that Megaport is a buy.

‘Considerable runway’ for these growth shares

Resmed CDI (ASX: RMD) is also off to a flying start this year, rising more than 10%.

The growth stock is now trading more than 30% higher since its September trough.

The ECP team liked what it saw from a business update last month.

“The recent quarterly result was received well by the market as it signified operational leverage and margin improvement. 

“Sleep apnoea is still a major problem and an underpenetrated market both in the US and globally, leaving a considerable growth runway available for RedMed.”

ResMed currently has almost the whole sleep apnoea device market to itself.

“With other competitors still well behind, we remain positively disposed to the company’s future prospects.”

Currently, 18 out of 26 analysts surveyed on CMC Invest believe ResMed shares are a buy.

The post 2 ASX 200 growth shares to buy with ‘immense opportunity’ ahead appeared first on The Motley Fool Australia.

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More reading

• Brokers say these explosive ASX growth shares are buys with massive upside
• How high could the ResMed share price climb?
• 3 ASX shares this fund manager thinks are compelling buys right now
• 2 sizzling-hot ASX stocks to buy right now
• Here’s how the ASX 200 market sectors stacked up this week

Motley Fool contributor Tony Yoo has positions in ResMed. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Megaport and ResMed. The Motley Fool Australia has positions in and has recommended ResMed. The Motley Fool Australia has recommended Megaport. 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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S&P/ASX 200 Index (ASX: XJO) investors have been waiting a long time for the Reserve Bank of Australia (RBA) to cut interest rates.

The last reduction to Australia’s official cash rate came in November 2020. Worried about deflation and the economic impacts of the global pandemic, that day saw the RBA cut interest rates by 0.25%, which brought the cash rate down to 0.10%.

The cash rate remained at that historic low until May 2022.

With inflation suddenly soaring, the RBA then began a rapid tightening cycle. The last increase in November 2023 brought the benchmark interest rate to the current 4.35%.

The ASX 200 has weathered those increases surprisingly well. Yet stocks have gone backwards with nearly every rate hike announcement while lifting with almost every pause in the tightening cycle.

With history as our guide, ASX 200 investors will likely send the market march higher once the central bank begins easing.

Many investors were disappointed when that didn’t happen in February. And according to the RBA interest rate indicator, 10% are still expecting that to happen when the RBA board meets again on 19 March.

(Those expectations may be higher now, following a higher-than-expected increase in unemployment. Thursday’s data revealed the Aussie jobless level increased to 4.1% in January. That’s up from 3.9% and the highest in two years.)

How long will ASX 200 investors have to wait for interest rates to come down?

While interest rates went up by the elevator, it’s likely they’ll take the stairs on the way down.

According to RBA governor Michele Bullock, “Our view, and it’s reflected in our forecasts, is that inflation is being persistent. But we are seeing it come down and back in the band in 2025.”

A large part of that persistent inflation (which just a few years ago was ‘stubbornly absent’) stems from the lagging increases in services costs. Those service cost increases are also lagging behind the slowing inflation we’re seeing across most market sectors.

With all this in mind, economists at the Commonwealth Bank of Australia (ASX: CBA) are pencilling in the first RBA rate cut in September.

While that might seem a long way off, CommBank CEO Matt Comyn cautions that ASX 200 investors may not see any interest rate relief until 2025 (courtesy of The Australian Financial Review).

That’s partly due to the sticky inflation in the United States. US inflation came in at an annual rate of 3.1% in January, above consensus expectations of 2.9%.

Citing “persistent” inflation, Comyn said of CBA’s September base case for rate cuts that “there is certainly a possibility that could be delayed” until 2025.

According to Comyn:

[Rate cuts] will be data-driven and, clearly, inflation coming down should be the highest priority. There is some uncertainty about exactly when rates will come down and what the pace of the reductions might be.

Foolish takeaway

There’s clearly a lot of uncertainty in the air.

While that can be disconcerting, there’s one thing we can be (almost) certain of.

Interest rates will come back down.

That may happen as early as March. Or it may not happen until September or even not until 2025.

In the meantime, I suggest using any shorter-term market retrace as an opportunity to look at adding more high-quality ASX 200 shares to your investment portfolio.

The post Crikey! Will ASX 200 investors really have to wait until 2025 for RBA interest rate cuts? appeared first on The Motley Fool Australia.

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More reading

• How much passive income could I earn buying $5,000 of CBA shares today?
• Why you should sell your CBA shares before it’s too late
• 5 things to watch on the ASX 200 on Thursday
• Everything you need to know about the CBA dividend
• CBA shares tumble 3% on half-year profit decline and margin pain

Motley Fool contributor Bernd Struben 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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There’s are good reasons passive income investors often hold Commonwealth Bank of Australia (ASX: CBA) shares in their portfolios.

Atop from the potential for share price gains (CBA shares are up 62% over five years), the S&P/ASX 200 Index (ASX: XJO) bank stock has a long history of paying two fully franked dividends per year.

CBA even made two dividend payouts in 2020, despite the COVID-19 stock market madness of that time. And those dividends aren’t included in the share price gains I mentioned above.

With that in mind, how much passive income could I earn if I invested $5,000 in CBA shares today?

Banking on passive income from CBA shares

As CBA just reported its half-year results on Wednesday, we have a better grasp on what kind of dividend payments I might expect from the ASX 200 bank stock in the year ahead.

As for Wednesday’s results, CBA reported a 0.2% year on year increase in operating income, which reached $13.65 billion for the six months.

But with expenses up 4% over the half year, the big bank’s cash net profit after tax (NPAT) slipped 3% to $5.02 billion.

Still, CBA pleased passive income investors with a 2.4% boost to its interim dividend, which came out at $2.15 per share.

CBA shares trade ex-dividend next Wednesday, 21 February. So if I buy shares today (and hold them at close next Tuesday) I’ll be eligible to receive that dividend. I can then expect that payout to land in my bank account on 28 March.

On the back of a strong FY 2023, CBA also paid a final dividend of $2.40 per share on 28 September.

That brings the past 12 months of passive income payouts to $4.55 per share.

At Thursday’s closing price of $114.96 a share, CBA shares trade on a yield (partly trailing, partly pending) of 4.0%, with potential tax benefits from those franking credits.

Getting back to our headline question then, I could buy 43 CBA shares today with my $5,000, leaving me with just over $50 in change.

And I could expect $195.65 in passive income over the coming year from those shares.

Of course, I’ll also be hoping to see a continuation of the long-term trend that’s seen the CBA share price gain 62% over the past five years!

The post How much passive income could I earn buying $5,000 of CBA shares today? appeared first on The Motley Fool Australia.

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More reading

• Why you should sell your CBA shares before it’s too late
• 5 things to watch on the ASX 200 on Thursday
• Everything you need to know about the CBA dividend
• CBA shares tumble 3% on half-year profit decline and margin pain
• CBA share price on watch following $5b cash profit and dividend boost

Motley Fool contributor Bernd Struben 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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One million.

It’s just a number, but there’s something magic about seven figures that fascinates people.

If you’d like to one day have a million dollars in the bank, I’m here to tell you it’s possible with S&P/ASX 200 Index (ASX: XJO) shares.

You don’t have to be outrageously wealthy to start with. You just need discipline and a standard day job to make it happen.

Let me take you through on possible scenario:

Invest your savings now into the ASX 200

Comparison site Finder last year found the average Australian has $40,000 saved up.

So let’s say you build yourself a stock portfolio with that.

Of course, at The Motley Fool we always urge investors to diversify their holdings to spread out the risk.

But other than that, go for the style that you find comfortable. Growth or dividend shares, it doesn’t matter.

Either way, over the long term, I reckon you could aim to secure a 12% compound annual growth rate (CAGR).

Does that sound like a dream?

Check this out.

Over the past five years, quality ASX 200 names like Lovisa Holdings Ltd (ASX: LOV) and Altium Ltd (ASX: ALU) have managed to nab CAGRs of 25.3% and 19.4% respectively.

It’s not like these are risky startups. They are established businesses among the top 200 largest public companies in the country.

Of course, I’m not saying every stock in your portfolio will do as well as Lovisa and Altium.

But with proper diversification, there might be a few of those winners mixed in with others that don’t as well — and the whole lot could realistically perform at 12% growth each year.

Can you save regularly?

Now, what about that discipline I mentioned before?

That’s needed to save regularly and keep adding to the portfolio.

A $40,000 parcel of shares growing at 12% each year with a further $580 invested each month could take you to seven figures in pretty reasonable time.

If the returns are compounded monthly, after 20 years that portfolio would be worth $1,009,470.

There’s your million!

So if you start this at age 25, you could be retiring as a millionaire by the time you’re just 45.

Even if you begin your stock investing journey at 40, you’d end up with a mill way before the legislated retirement age.

Best wishes for your investments.

The post I’d invest $580 a month in ASX 200 shares to aim for a million! appeared first on The Motley Fool Australia.

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More reading

• Here are the top 10 ASX 200 shares today
• Own Lovisa shares? Here’s the results preview you need to see
• Why Altium, Goodman, Magellan, and Wesfarmers shares are storming higher today
• Altium shares rocket on $9.1b takeover deal
• 2 excellent ASX dividend shares that analysts love

Motley Fool contributor Tony Yoo has positions in Lovisa. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Altium and Lovisa. The Motley Fool Australia has recommended Lovisa. 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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The Woodside Energy Group Ltd (ASX: WDS) share price dipped in late afternoon trading to close 3.01% lower at $30.24.

This is the lowest price that the oil and gas giant has traded at since mid-December.

The move appears to have been triggered by an announcement released 23 minutes before the market close detailing some major financial news.

Let’s look into the details.

Woodside share price dips on US$1.5 billion impairment

Woodside released its Reserves Statement and financial updates revealing an approximate collective US$1.5 billion (A$2.31 billion) impairment.

The company said its 2023 full-year financial statements were expected to recognise non-cash post-tax asset impairments of approximately US$1.5 billion.

This includes approximately $1.2 billion for the Shenzi Joint Venture.

Woodside said it was primarily related to goodwill and a portion of the purchase price assigned to Shenzi on completion of the merger with the petroleum division of BHP Group Ltd (ASX: BHP).

The Shenzi JV is located in the Shenzi conventional oil and gas field, approximately 195km off the coast of Louisiana in the Green Canyon protraction area of the Gulf of Mexico.

In a statement, Woodside said:

The goodwill and purchase price allocation resulted from application of acquisition accounting principles and reflect both higher hydrocarbon prices and Woodside’s share price at the merger completion date.

Goodwill is not amortised and, once impaired, is not subject to a future impairment reversal. For reference, Shenzi represented approximately 5% of 2023 production and approximately 2% of 2023 year-end proved plus probable reserves.

As part of the total US$1.5 billion impairment, the 2023 full-year statements will also recognise a non-cash post-tax impairment of approximately $300 million for the Wheatstone Project in Western Australia.

Woodside says this is mainly related to short-term pricing.

The company will exclude the impairment when it calculates the final dividend, as per previous practice.

Oil and gas reserves update

Woodside also announced that it added 266 MMboe of ‘proved’ oil and gas reserves in 2023, replacing 132% of production.

With ‘probable’ reserves added, the total goes up to 318 MMboe, replacing 158% of production.

Woodside said its proved reserves’ life is 12.2 years based on 2023 production levels. This puts it in the top benchmark quartile of global peers.

Woodside CEO Meg O’Neill said this reserves update reflected Woodside’s larger portfolio following the BHP merger.

O’Neill said:

Woodside has delivered strong operational performance over the past 12 months. We achieved record production in 2023, while progressing a world-class funnel of development opportunities, which have us well positioned for growth and returns.

Our success in integrating the strategic merger with BHP Petroleum, combined with our ability to advance major projects and improve performance has delivered a high-quality resource base that enjoys top quartile reserves life.

Woodside share price snapshot

The Woodside share price is down 13.6% over the past 12 months.

By comparison, the S&P/ASX 200 Index (ASX: XJO) is up 2.6% over the same period.

The post Woodside share price dips to two-month low upon late news announcement appeared first on The Motley Fool Australia.

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More reading

• Which ASX 200 large-cap shares offer the best dividend yields in 2024?
• 5 things to watch on the ASX 200 on Thursday
• How are Woodside shares avoiding the market selloff today?
• 5 things to watch on the ASX 200 on Wednesday
• How another acquisition could boost Woodside shares following the collapse of the Santos deal

Motley Fool contributor Bronwyn Allen has positions in BHP Group and Woodside Energy Group. 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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The post Here are the top 10 ASX 200 shares today appeared first on The Motley Fool Australia.

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• Which ASX 200 large-cap shares offer the best dividend yields in 2024?
• What can Wesfarmers’ results tell us about the future of ASX lithium shares?
• How have Sayona Mining shares risen 25% in just 2 days?
• 2 ASX 200 real estate shares leaping higher on earnings news
• Why Altium, Goodman, Magellan, and Wesfarmers shares are storming higher today

Motley Fool contributor Sebastian Bowen has positions in Wesfarmers. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Altium, Goodman Group, Life360, Wesfarmers, WiseTech Global, and Xero. The Motley Fool Australia has positions in and has recommended Wesfarmers, WiseTech Global, and Xero. The Motley Fool Australia has recommended Goodman Group. 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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National Australia Bank Ltd (ASX: NAB) shares will be in focus next week.

That’s because the big four bank is scheduled to release its first quarter update before the market open on 21 February.

Ahead of the release, let’s take a look to see what the market is expecting from NAB.

NAB first quarter preview

With NAB shares trading within a whisker of a 52-week high, you might think that expectations are high going into this update.

Though, that’s not necessarily the case.

As a reminder, a year ago, NAB released its quarterly update and revealed cash earnings of $2.15 billion.

The market isn’t expecting a result anywhere near that level next week.

For example, according to a note out of Citi, its analysts are expecting NAB to report cash earnings of $1.8 billion for the three months. This represents a year on year decline of approximately 16%.

In addition, it worth noting that Citi’s estimate is actually 4% ahead of the consensus estimate for cash earnings of $1.73 billion.

Citi is expecting the bank to outperform expectations thanks largely to lower than expected bad and doubtful debts. Its analysts believe the market is being too negative on its credit quality assumptions.

The broker also believes that NAB’s net interest margin will be stronger than expected and that its CET1 ratio will only ease to 11.9% from 12.2% at the end of June.

Interestingly, despite the above, the broker has reiterated its sell rating and $25.75 price target on the bank’s shares. This implies almost 22% downside for NAB shares over the next 12 months.

The post Own NAB shares? Here’s how much profit to expect in Q1 appeared first on The Motley Fool Australia.

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More reading

• Which ASX 200 large-cap shares offer the best dividend yields in 2024?
• Big news: 15 ASX 200 shares smashing 52-week highs this Tuesday
• Transform $50 into monthly income: The best ASX dividend stocks under $50
• 3 top ASX bank shares hit 52-week highs today: Is there still value to be found?
• What is the outlook for NAB shares under new CEO Irvine?

Citigroup is an advertising partner of The Ascent, a Motley Fool company. Motley Fool contributor James Mickleboro 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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Many of Australia’s top brokers have been busy adjusting their financial models again, leading to the release of a number of broker notes this week.

Three ASX shares brokers have named as buys this week are listed below. Here’s why they are bullish on them:

AMP Ltd (ASX: AMP)

According to a note out of Citi, its analysts have upgraded this financial services company’s shares to a buy rating with an improved price target of $1.25. This follows the release of the company’s FY 2023 results. The broker highlights that the company is making strides with its cost reductions and expects this to boost its earnings in the near term. The AMP share price is trading at $1.12.

Computershare Ltd (ASX: CPU)

Another note out of Citi reveals that its analysts have retained their buy rating on this administration services company’s shares with an improved price target of $30.00. The broker was pleased with Computershare’s performance in the first half, noting that its earnings before interest and tax coming in a touch ahead of expectations. It remains upbeat on its earnings growth prospects over the medium term. The Computershare share price is fetching $25.99 today.

CSL Ltd (ASX: CSL)

Analysts at Morgans have retained their add rating on this biotechnology giant’s shares with a trimmed price target of $315.40. This follows the release of a solid half-year result which saw earnings come in ahead of consensus expectations. Morgans was pleased with the result and particularly the performance of the key CSL Behring business. And while it has trimmed its valuation to reflect the disappointing CSL112 trial failure, it still sees plenty of value on offer here. The CSL share price is trading at $283.25 on Thursday.

The post Top brokers name 3 ASX shares to buy today appeared first on The Motley Fool Australia.

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More reading

• Here are the top 10 ASX 200 shares today
• Why AMP, Core Lithium, Downer EDI, and IDP Education shares are racing higher
• Looking for passive income? This ASX All Ords stock just boosted its dividend by 33%!
• AMP share price rockets 10% amid 2023 earnings boost
• 5 things to watch on the ASX 200 on Wednesday

Citigroup is an advertising partner of The Ascent, a Motley Fool company. Motley Fool contributor James Mickleboro has positions in CSL. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended CSL. The Motley Fool Australia has recommended CSL. 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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With interest rates as high as they are and the best savings accounts delivering 5.75% returns, ASX dividends are on investors’ minds this year.

The ASX 200 bank shares and mining shares are well-known for delivering some of the highest dividend yields in the market year after year.

But if you do some digging, you’ll find other great dividend payers in other market sectors.

Typically, the companies that will pay you the best dividend yields are the ASX 200 large-cap shares.

With a minimum market capitalisation of $10 billion, these are the biggest companies on the market. Most of them have been operating for decades, bringing in sustainably strong earnings every year.

Let’s look at which ASX 200 large-cap shares are trading on the highest trailing dividend yields today.

Woodside is the best ASX dividend payer

The best payers of the ASX 200 large-cap shares today, based on trailing dividend yields, are:

ASX 200 LARGE-CAP SHARE	ASX DIVIDEND YIELD	PAID PER SHARE
Woodside Energy Group Ltd (ASX: WDS)	11.1%	$3.40
Pilbara Minerals Ltd (ASX: PLS)	7.14%	25 cents
APA Group (ASX: APA)	6.86%	55.5 cents
Fortescue Metals Group Ltd (ASX: FMG)	6.27%	$1.75
ANZ Group Holdings Ltd (ASX: ANZ)	6.21%	$1.75
Westpac Banking Corp (ASX: WBC)	5.82%	$1.42
BHP Group Ltd (ASX: BHP)	5.81%	$2.61
National Australia Bank Ltd (ASX: NAB)	5.08%	$1.67
Santos Ltd (ASX: STO)	4.88%	35.76 cents
Transurban Group (ASX: TCL)	4.77%	61.5 cents
Telstra Group Ltd (ASX: TLS)	4.36%	17 cents
South32 Ltd (ASX: S32)	4.15%	12.31 cents

A word of warning on trailing dividend yields

If you’re using this data to research ASX dividend shares, just remember that trailing dividend yields represent last year’s earnings as a percentage of today’s share price.

Next year’s earnings may be much lower (or higher).

This is particularly the case with mining stocks, oil shares and any other stock associated with commodities.

These companies negotiate the sale prices for their products based in large part on the going global market commodity price at the time.

Commodity prices are entirely out of these companies’ hands. When they’re high, mining and oil shares are likely to earn more and pay higher dividends. When they’re low, the reverse happens.

Conversely, large non-commodity companies producing the same services or products year after year may have limited room for growth, and hence they may deliver very stable earnings and dividends.

Here are some examples showing why you need to bear all this in mind when researching dividend yields on ASX stocks.

ASX dividend case studies

Woodside shares

ASX oil & gas giant Woodside is shown here as the top payer because its trailing dividend amount (i.e, the annual dividend amount paid in 2023) was $3.40 per share.

The Woodside share price is currently $30.64, so we get a trailing dividend yield of 11.1%.

But global oil and gas commodity prices have been fluctuating pretty wildly, and the consensus forecast among analysts on CommSec is that Woodside will pay nowhere near as much in dividends this year.

The analysts are currently forecasting a 2024 annual dividend of $1.62, which would equate to a 5.28% yield. That’s more than a 50% reduction in yield compared to 2023.

Pilbara Minerals shares

The 2024 dividend forecast is far worse for this ASX lithium share, following an 80% plunge in the lithium price in 2023.

The company has already flagged that it is unlikely to pay any dividend at all for 1H FY24.

Let’s compare these two commodity-related stocks to one of the Big Four banks.

ANZ stocks

Our biggest payer among financial stocks listed above, based on trailing dividend yields, is ANZ shares.

In 2023, ANZ paid $1.75 per share in dividends. The consensus forecast on CommSec is for ANZ shares to pay $1.62 per share in 2024, the same in 2025, and $1.625 in 2026.

The dividend is pretty stable because ANZ is a big, mature business delivering reliable annual earnings.

On top of that, the ANZ share price doesn’t move much over time (except during major bull runs and market crashes when all stock prices move significantly), so dividend yields stay pretty even.

The 20-year chart of ANZ shares and dividends below shows this.

Why choose ASX shares over simple savings?

Five of our top 12 ASX dividend stocks listed above will pay less than the best interest rate on savings accounts today, which is 5.75%, according to RateCity.

So, why would you buy ASX shares instead of investing cash in a simple risk-free savings account?

There are two key reasons:

1. ASX shares offer the possibility of capital growth as well as yield. Savings only pay a yield.
2. Dividends paid by many ASX 200 large-cap shares carry franking credits, which reduce an investor’s tax liability. There are no tax breaks on interest earnings.

We recently published a team post, Top ASX shares to buy in 2024 instead of investing in a term deposit.

The post Which ASX 200 large-cap shares offer the best dividend yields in 2024? appeared first on The Motley Fool Australia.

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• Why BHP, IDP Education, Pro Medicus, and Whitehaven Coal shares are dropping
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Motley Fool contributor Bronwyn Allen has positions in Anz Group, BHP Group, South32, Westpac Banking Corporation, and Woodside Energy Group. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Goldman Sachs Group and Transurban Group. The Motley Fool Australia has positions in and has recommended Apa Group and Telstra Group. 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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Miners are mothballing projects left, right, and centre. An oversupply of commodities common in batteries, namely electric vehicles (EVs), has left mining monsters stumbling. Arguably, none more afflicted than ASX lithium shares.

One begins to wonder whether the good times for the industry are 10 miles back in a ditch. On the other hand, could the supply and demand dynamics be nearing a favourable shift? It’s impossible to know for sure.

However, Wesfarmers Ltd (ASX: WES) CEO Rob Scott has shed some light on the path for the critical electrifying material today.

‘Nothing has really changed’

Australia’s retailing powerhouse, Wesfarmers, unwrapped its first-half figures for the market to admire this morning — and admire it has. Shares in the Bunnings, Kmart, and Officeworks owner are up 5% to $61.84 per share in afternoon trading.

While known for its gargantuan presence in retail, Wesfarmers also operates a chemicals business under the WesCEF banner. Under this umbrella lies Wesfarmers’ 50% stake in Covalent Lithium, which is in a joint venture for the Mt Holland project in Western Australia.

Details on lithium in the presentation were limited. The Mt Holland concentrator is expected to produce its first spodumene concentrate sometime between now and the end of June. From there, the company already has offtake arrangements in place with ‘tier-one auto and battery customers’.

But that doesn’t give us much insight into the lithium sector as a whole. Fortunately, Rob Scott shared more details with the media published in The Australian Financial Review. Providing commentary on the downtrodden lithium market, Scott professed:

Notwithstanding the volatility we’ve seen in recent months, nothing has really changed as far as we’re concerned.

Expanding upon this, the Wesfarmers’ CEO articulated:

What often happens is that, given the strong demand that we are seeing in lithium, there could well be shortages of supply in the years ahead.

#Lithium carbonate production insights from China in Jan/Feb 2024.

February production is expected to fall to 32kt from 42kt in January. representing a month-on-month (MoM) decline of 23%.

This is due to CNY holidays and “a subsequent period of concentrated maintenance,… pic.twitter.com/xza0eE73jB

— ᴀᴍᴀʟ ɪʟʟᴇꜱɪɴɢʜᴇ (@mineralsmindset) February 13, 2024

https://platform.twitter.com/widgets.js

Data from Macquarie points to lithium inventory in China experiencing its first decline last month since October 2023. Conversely, cathode and electrolyte demand is said to have jumped 7%. These two factors worked in tandem to reduce the estimated lithium surplus.

Costs are key for ASX lithium shares

If there is a takeaway for the lithium sector from Wesfarmers today, it’s arguably all about costs.

In recent months, Aussie lithium companies have decided to reduce or suspend production as costs rise above revenue. One such example is Core Lithium Ltd (ASX: CXO), which saw its share price gutted to the tune of 21% after announcing a curbing of production.

The difficult decision highlights the advantage of low-cost miners in this environment, as explained by Scott, stating:

We feel that the dynamics are still very strong for our project and indeed for many who produce by having low-cost structures, reliable production, and hopefully by getting our hydroxide plant working, that will provide another opportunity to capture additional margin and upside within the lithium value chain.

Lithium carbonate prices have tracked sideways since December, holding around CNY$97,500 per tonne.

The post What can Wesfarmers’ results tell us about the future of ASX lithium shares? appeared first on The Motley Fool Australia.

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More reading

• Why Altium, Goodman, Magellan, and Wesfarmers shares are storming higher today
• Wesfarmers share price pops 5% to new high after dividend hike
• Wesfarmers share price on watch amid stellar first-half Kmart growth
• Beginners: Here are 2 ASX dividend stocks to get your portfolio started!
• Are Wesfarmers shares a good long-term buy?

Motley Fool contributor Mitchell Lawler has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Wesfarmers. The Motley Fool Australia has positions in and has recommended Wesfarmers. 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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