Insights

Why ASX lithium shares are beating the iron ore majors – again

The fortunes of ASX iron ore shares and lithium miners continue to diverge. Here’s why…
The post Why ASX lithium shares are beating the iron ore majors – again appeared first on The Motley Fool Australia. –

The mining sector is dragging on the market this morning – but that’s not the case for ASX lithium shares which are trading higher.

The underperformance of the sector is primarily due to the fall the big ASX mining shares, which are all exposed to iron ore.

The Fortescue Metals Group Limited (ASX: FMG) share price dropped 2% to $23.91, the BHP Group Ltd (ASX: BHP) share price shed 1.6% to $52.85 and the Rio Tinto Limited (ASX: RIO) share price surrendered 1.2% to $131.62 at the time of writing.

Our largest miners were the main drags on the S&P/ASX 200 Index (Index:^AXJO) as it dipped 0.2%.

ASX lithium shares bucking the downtrend

However, the smaller ASX lithium shares are bucking the trend. The Galaxy Resources Limited (ASX: GXY) share price rallied 3.2% to $4.84 and Pilbara Minerals Ltd (ASX: PLS) share price added 2.1% to $1.95.

This rotation has been playing out in recent days and could continue for a little while yet.

This is because the outlook for both commodities have started to diverge – and quite rapidly.

Iron ore could fall deeper into bear market

The price of iron ore has fallen into a bear market and Morgan Stanley believes the steel making mineral has passed its peak.

“The iron ore price is falling, down to $181/t from a high of $222/t in early July, pulled down by rapidly slowing Chinese demand,” said the broker.

“We see further downside price pressure, as we expect the incremental market tightness that pushed iron ore through the $200/t barrier during 1H to fully unwind in 2H21.”

Morgan Stanley is forecasting the average price for the ore will tumble to US$160 a tonne by the 2021 December quarter. More worryingly, it warned that even that estimate may prove to be too optimistic.

Brighter outlook for ASX lithium shares

Meanwhile, the outlook for lithium continues to power up. Macquarie Group Ltd (ASX: MQG) noted that spodumene spot prices have surged to over US$1000 a tonne.

“Global passenger electric vehicle sales rose 153% YoY in June to 540k vehicles and 161% YoY in the first half to 2.4m vehicles,” said the broker.

“Macquarie’s Commodities Strategy Team believed that full-year 2021 sales should be well above 5mt and upgraded their forecast from 4.8m to 5.3m vehicles.

“An expected end-year surge in sales in Europe and China could take the final figure even higher.”

ASX shares to buy

In this context, Rio Tinto Limited’s (ASX: RIO) move to expand aggressively into lithium looked well timed. But it will be 2026 before its Jadar project will hit first production.

Macquarie’s top buys in the sector are the Mineral Resources Limited (ASX: MIN) share price, IGO Ltd (ASX: IGO) share price and Pilbara Minerals share price.

The post Why ASX lithium shares are beating the iron ore majors – again appeared first on The Motley Fool Australia.

Wondering where you should invest $1,000 right now?

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes could be the five best ASX stocks for investors to buy right now. These stocks are trading at near dirt-cheap prices and Scott thinks they could be great buys right now.

*Returns as of May 24th 2021

More reading

Why Afterpay, Bellevue Gold, Pilbara Minerals, & Zip are charging higher

ASX 200 midday update: Afterpay jumps again, Qantas stands down crew

This leading broker believes Fortescue Metals (ASX:FMG) shares can lift
ASX 200 shares to shift earnings growth up a gear in FY22 – Expert

Own BHP (ASX:BHP) shares? Here’s what to look for during reporting season

Motley Fool contributor Brendon Lau owns shares of BHP Billiton Limited, Fortescue Metals Group Limited, Galaxy Resources Limited, Macquarie Group Limited, and Rio Tinto Ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Macquarie Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

Trade The World Anywhere & Anytime!

Mobile app platform with over 50,000 global listed securities across 12 markets (over 70% global market capitalisation), right from your Android or iOS device.

Integrated with exclusive trading idea and investment analysis tools to help you find actionable insight on virtually every financial instrument across our 12 global markets, to help you optimise your trading strategies.

Refer Your Friends

Tell your friends about Monex and gift them FREE access to our trading tools.

We respect your privacy and will only send this one email notification to your friends. 

Share With Your Friends

Share on facebook
Share on twitter
Share on linkedin

Monex Trading Tools Access and Usage Terms

The Monex Trading Tools (referred to as ‘tools’ hereafter) are available to you inside your client portal;


To activate access to the tools, you must have a verified and approved trading account and have made a deposit of at least AUD $1000.


An active and funded account with a positive trading balance is required to continue to have access to the tools;


Although the tools are available to you indefinitely, Monex Securities may at it’s discretion disable access to the tools in the future;


Monex securities reserves the right to change these terms and conditions from time to time, as it sees fit, without notice.

Important Notice
iOS & Android App - 12 International Markets & Over 70% Global Market Cap. $0 Brokerage On US Trades. Click Here!