The market started off the week on a tumble, but a few key lithium plays have beaten the trend after international broker Macquarie upgraded their target prices on certain Aussie lithium stocks.
Most commodities such as iron ore and copper have been downgraded due to worries of a sharp slowdown in economic growth, particularly in China. Butwhen it comes to lithium Macquarie have stated that Chinese lithium carbonate prices continue to trade at material premiums to regional prices.
“We upgrade medium-term lithium carbonate and hydroxide price outlook and expect prices to stay higher for longer. We also lift our regional lithium price forecasts to match the pricing strength in China.”
The broker also pointed out that sales of electric vehicles (EVs) continue to grow strongly in 2022, despite the rising costs of raw materiels. Macquarie expects sales will hit 10 million vehicles this year which is an increase of 50%. Macquarie also upgraded its short- and medium-term spodumene prices due to lack of supply coming online. Therefore, its peak price assumption increases by 2% to US$5,000 a tonne (for the quarterly average price).
As a result of all of this, a couple of great Australian lithium miners are the best positioned to take advantage of these high prices. One of Macquarie’s favourites is Pilbara Minerals and they have increased its 12-month price target on the miner to $5.60 a share (current share price of $3.17.
Another popular share in the form of Allkem Ltd, Macquarie also lifted its price target by 30% to $21 a share (current share price of $12.50). Allkem also hasunique exposure to both lithium brine in South America and spodumene production in Australia.