Lithium Prices Recovering: Is Now the Right Time to Buy ASX Lithium Stocks?

The global lithium market has experienced a steep downturn, but recent signs suggest that the worst may be behind us. In early 2025, lithium carbonate prices plummeted by more than 70% from their 2023 peak, amid persistent oversupply and subdued demand for electric vehicles (EVs). Spodumene concentrate, the primary feedstock for lithium refining, dropped from around US$3,700 per tonne to near US$800, putting significant pressure on high-cost producers.

Nevertheless, a gradual recovery is underway. Morgan Stanley previously estimated lithium prices could average around US$13,250 in 2024, but near-term downside remains. Morningstar expects a gradual lithium price recovery, with potential mid-cycle prices near US$15,000/t. This rebound is expected as uneconomical supply exits the market, while underlying EV and energy-storage demand remain solid.

Investor sentiment improved in mid-2025, likely due to policy signals and supply cutbacks. Notable gains included Pilbara Minerals surging over 12%, Mineral Resources climbing 15%, and Liontown up more than 5%. Investors are once again turning their attention to this beaten-down sector.

Strong Long-Term Demand Underpins Recovery

Demand for lithium remains strong. Batteries, especially those for EVs, accounted for about 90% of global lithium consumption in 2024, with EVs alone contributing around half that demand. EV adoption is projected to grow significantly, with some forecasts suggesting global EV penetration could reach between 30–35% by 2030, depending on policy and cost trends. Meanwhile, grid-scale energy storage is also scaling sharply, further supporting sustained lithium use.

On the supply side, some high-cost and speculative projects, particularly in Australia, have already slowed production or postponed expansions. This suggests a possible rebalancing of the market toward supply deficits by 2026. Such dynamics underlie the improved medium-term price outlook.

ASX Lithium Stocks: Value Amid Value Traps

ASX-listed lithium producers have faced the brunt of price pressure. Pilbara Minerals, one of the sector’s most significant players, has seen its share price drop about 80% from its peak in 2023, trading near $1, levels last seen in 2021. UBS has even downgraded Pilbara to “sell,” citing a current cash cost near US$499/t and downside if spodumene prices linger around US$625/t. Despite these concerns, Pilbara concluded a multi-year optimisation program in mid‑2025, setting the stage for lower production costs and improved efficiency.

Morningstar notes Pilbara trades at a 62% discount to its AUD 3 fair value estimate, while IGO trades roughly 42% below its AUD 6.50 valuation. Pilbara’s Pilgangoora operation is the world’s second-largest hard-rock lithium mine, with two active plants; 408,000 dry metric tonnes of spodumene concentrate in FY24.

IGO owns a 24.9% indirect interest in the Greenbushes mine, the world’s largest spodumene producer, marking its indirect yet pivotal role in securing supply. Its diversified portfolio and management stance, highlighting long-term supply deficits despite cyclical volatility, have attracted investor confidence.

Other ASX lithium names, Liontown, Core Lithium, and Mineral Resources, have shed 50–67% in market value over the past year. Morningstar and other analysts flag Pilbara, IGO, and Mineral Resources as undervalued entry points for long-term investors.

Risks: Volatility and Cost Pressures Remain

Several risks temper the bullish narrative. First, the lithium price recovery may take time. Even with a gradual rebound, prices could stay below cost levels, especially for hard-rock producers, into 2026. Australian spodumene concentrate production costs typically range from US$400–900/t, whereas Chinese brine operations can produce at around US$8,000–10,000/t. If prices linger low, high-cost producers may falter, and equities remain vulnerable.

Second, macroeconomic conditions may affect EV growth. China’s recent EV subsidy cuts led to slower uptake, dampening demand projections in 2024. Third, global inventories remain elevated, requiring careful monitoring. Oversupply persisted into Q1 2025 and has depressed prices alongside project delays.

Should Australian Investors Buy Now?

For investors willing to accept short-term softness for long-term upside, a strategic entry now may offer strong potential. Market indications suggest lithium prices are nearing a turning point. Pilbara Minerals and IGO, trading well below their intrinsic values, present opportunities for cautious accumulation. However, it is crucial to temper expectations; any recovery will be gradual, likely only showing sustained momentum by late 2026 as lower-cost supply exits and demand strengthens.

A prudent strategy involves acquiring partial positions now, with the potential to add on further pullbacks or confirmation of price recovery. It is essential to monitor key indicators, EV sales trends, price movements in lithium carbonate and spodumene, and updates on supply-side project economics. Diversification is key, as exposure to hard-rock lithium remains sensitive to commodity swings and production costs.

Conclusion

In sum, lithium prices have begun the early stages of recovery, propelled by stronger EV growth and tightening supply dynamics. Select ASX lithium stocks, particularly Pilbara and IGO, are trading at notable discounts, offering the potential for attractive returns if the outlook unfolds as expected. However, patience is required: volatility remains high, and fundamental improvements may take time. Investors are best served by adopting a phased investment approach, vigilant monitoring of key market indicators, and maintaining disciplined portfolio exposure.

What are the Best ASX Stocks to invest in right now?

Check our buy/sell tips

FAQs

• Why did lithium prices fall so sharply in 2023 and early 2024?

  Lithium prices dropped due to a global oversupply driven by rapid production increases, especially from China and Australia. Slower-than-expected electric vehicle demand and elevated inventories further pushed prices down across lithium carbonate and spodumene concentrate.

• Are lithium prices expected to recover in the short term?

  Most forecasts suggest a gradual recovery starting in late 2025. Analysts believe prices have likely bottomed, but high inventory levels and cost pressures may delay a sharp rebound until supply tightens or demand accelerates further.

• Which ASX-listed lithium stocks are best positioned for a recovery?

  Pilbara Minerals and IGO Ltd are widely considered well-positioned. Both have quality assets, cost advantages, and strong balance sheets. They also trade below their fair value estimates according to Morningstar and other analysts.

• Is it risky to invest in lithium stocks right now?

  Yes, there are short-term risks, including price volatility, delayed demand growth, and high production costs. However, long-term investors who can tolerate fluctuations may benefit as prices and sector earnings recover.

• How should investors manage exposure to the lithium sector?

  Experts recommend a diversified approach, either by investing in multiple lithium producers or through a fund that offers exposure to the broader battery metals space. Limiting lithium investments to a small portion of your overall portfolio is also advisable.