Why are the Core Lithium (CXO) and Pilbara Minerals (PLS) share prices rebounding?

Posted: 8 April 2022 3:44 pm

Shares in the 2 lithium explorers have more than trebled over the last 12 months.

Battery minerals suppliers Pilbara Minerals (ASX: PLS) and Core Lithium (ASX: CXO) are among the most traded shares on the ASX boards on Friday. After several days of decline, the 2 stocks are 1.5% and 3% higher respectively, at the time of writing.

What is boosting the PLS and CXO stock prices?

ASX-listed lithium stocks have been gathering momentum in recent weeks on growing expectations of a continued rise in prices, amid a looming supply deficit for the battery-making material.

Experts have been warning that supply is not keeping up with demand at a time of rapidly increasing manufacture of electric vehicles. That means despite prices of spodumene concentrate, the substance that is used to produce the lithium chemical used in electric vehicle batteries, having surged more than 10-fold in a little over 18 months, prices will keep rising further.

Accordingly, UBS this week upgraded its lithium price forecasts lifting the spodumene price forecast by about 17% to US$4,485 a tonne.

"We revise our near-term lithium prices reflecting continued tightness in the market and with no signs yet of easing," the broker said in a note. UBS believes the lithium market, like iron ore, will evolve with the industry gravitating towards spot pricing.

"We draw analogies to the breakdown of the annual iron ore contract where market dynamics evolved to a point where the price difference between spot and contracted pricing made long-term fixed-price agreements untenable," it said.

Global suppliers

The market dynamics are expected to benefit suppliers like Core and Pilbara Minerals, who have gradually evolved into key suppliers to the global battery minerals supply chain.

It has already resulted in a slew of lithium suppliers, including Core, as well as rivals like AVZ Minerals (ASX: AVZ) and Liontown Resources (ASX: LTR) hitting record highs earlier this week. After a bout of profit taking, the stocks are climbing again.

Last month, Core signed a landmark deal with electric vehicle giant Tesla Inc. (NASDAQ: TSLA) for the supply of up to 110,000 dry metric tonnes of spodumene concentrate over a 4-year period.

The deal marked the culmination of Core Lithium's transformation from another junior explorer to reliable supply partner for global firms.

Pilbara itself has underlined its status as a key supplier to the lithium market, more than doubling its shipments in FY21 to 281,440 dry metric tonnes.

It has already lifted the mineral resource at its 100%-owned Pilgangoora project in Western Australia, which is the world's largest, independent hard-rock lithium operation, producing a spodumene and tantalite concentrate.

Serious about investing? Here's your new unfair advantage

Ticker Nerd uses advanced software to track hundreds of signals and data points to find stocks before they blow up. Don't miss out!
Get started for free

Considering buying CXO or PLS shares?

If you are keen to buy Core Lithium or Pilbara Minerals shares, you should consider investing through an online share trading platform.

Keep in mind that not all platforms offer the same list of stocks. Some offer US stocks only, so make sure to select a platform that offers ASX-listed stocks.

Choose from the dozens available for Australian investors. Compare the features and fees from the plethora of trading platforms available.

Looking for a low-cost online broker to invest in the stock market? Compare share trading platforms to start investing in stocks and ETFs.

Disclaimer: This information should not be interpreted as an endorsement of futures, stocks, ETFs, CFDs, options or any specific provider, service or offering. It should not be relied upon as investment advice or construed as providing recommendations of any kind. Futures, stocks, ETFs and options trading involves substantial risk of loss and therefore are not appropriate for all investors. Trading CFDs and forex on leverage comes with a higher risk of losing money rapidly. Past performance is not an indication of future results. Consider your own circumstances, and obtain your own advice, before making any trades.

Get more from Finder

Ask an Expert

You are about to post a question on finder.com.au:

  • Do not enter personal information (eg. surname, phone number, bank details) as your question will be made public
  • finder.com.au is a financial comparison and information service, not a bank or product provider
  • We cannot provide you with personal advice or recommendations
  • Your answer might already be waiting – check previous questions below to see if yours has already been asked

Finder only provides general advice and factual information, so consider your own circumstances, or seek advice before you decide to act on our content. By submitting a question, you're accepting our Terms of Use, Disclaimer & Privacy Policy and Privacy & Cookies Policy.
Go to site