Lithium stocks weigh on ASX as analysts stay underweight on majors
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More news: Lithium stocks lowered on the ASX as Morgan Stanley analysts warned of declining prices of the battery-making material over the coming months, despite a slight recovery since the start of the year.
IGO (-3.8%), Liontown Resources (-3.7%), and Mineral Resources (-2.5%) were among the worst 20 performers in the ASX 200 by 1:50pm AEST, with Pilbara Minerals (-1.8%) also losing ground. Meanwhile, materials (-1.92%) saw the biggest sector-wide decline.
Morgan Stanley stays underweight on lithium despite price recovery
The news: Analysts at Morgan Stanley continue to remain wary of ASX-listed lithium stocks despite a slight recovery in prices of the battery-making material since the start of the year.
The numbers: Lithium prices have recovered somewhat since the start of the year in a tightening market, with robust cathode demand and supply disruptions. However, the balance is expected to loosen in the coming months as supply ramps up, with downside to Morgan Stanley’s lithium carbonate base case of USD13,500 ($20,402)/tonne.
The context: Morgan Stanley's commodity team recently highlighted that cathode restocking may be coming to an end, with inventories at the cathode segment normalising.
The analysts remained ‘underweight’ on Pilbara Minerals, with a potential downside of 15% on a price target of $3.35/share and ‘underweight’ on IGO, with a 17% potential downside due to risks to the company’s Greenbushes mine plan in addition to risks to its nickel asset life.
While the analysts are ‘overweight’ on Mineral Resources, they say this was mainly due to the firm’s iron ore exposure, with lithium only accounting for 20% of FY25 revenue.
The source: Morgan Stanley
