Goldman Sachs updates lithium market forecasts

Goldman Sachs said in a report that the total market capitalization of Australia’s lithium industry has risen from $15 billion to $60 billion in just two years due to soaring lithium prices. However, lithium prices are expected to decline in the second half of 2023 and 2024 as the supply and demand outlook rebalances.

According to the report, Goldman Sachs has a Buy rating on Allkem (ASX: AKE) with a $15.20 price target and a Sell rating on Core Lithium (ASX: CXO) with a $1 price target.

Elsewhere, Goldman Sachs has a Buy rating on Mineral Resource (ASX: MIN ) and a Neutral rating on Pilbara Minerals (ASX: PLS ), and Liontown (ASX: LTR ).

Goldman Sachs said: “Our research team expects that Chinese lithium carbonate spot prices in the first half of 2023 will reflect short-term tightness and lagged spodumene contract price pass-through, and the average price in 2023 is expected to decline in the second half of next year. It is 53,300 US dollars / ton of lithium carbonate equivalent.”

For Core Lithium, Goldman Sachs believes investors are overvaluing the company’s projects in Finland. Considering the decline in lithium prices in the next few years, Goldman Sachs said: “Core Lithium’s Finniss project will become Australia’s next lithium producer, with spodumene production planned for the first half of 23.”

“Core Lithium’s future average production is 175,000 tons per year, with a mine life of about 12 years. But in our view, while resources may rise, the scale of capacity expansion / life extension / future downstream needs currently included in inventory is still There are deficiencies.”

Goldman Sachs also highlighted that Core Lithium shares trade at a premium to its peers and has a low price-to-earnings ratio on free cash flow.

Affected by this news, Core Lithium’s stock price fell more than 6% in intraday trading today.