Lithium price set to soar 63% in FY27. Here's why and the ASX shares to buy

ASX lithium shares had an outstanding run in FY26 amid an astonishing 278% increase in the lithium spodumene price.

Lithium was by far the best-performing commodity relevant to Australian miners in FY26.

That run followed a two-year slump between mid-2023 and mid-2025 when the global lithium market became oversupplied.

Supply/demand finally rebalanced at the start of FY26, driven in large part by the green energy transition.  

Lithium is a key component in rechargeable batteries for electric vehicles (EVs), energy storage systems, e-bikes, and smartphones.

In FY26, lithium spodumene skyrocketed from about US$600 per tonne in June 2025 to US$2,270 per tonne in June this year.

The price has since come off quite substantially, falling to US$1,505 per tonne today.

This reflects more supply coming online as many junior miners come out of care and maintenance to restart operations.

However, the 12-month outlook for the lithium spodumene price is very positive, according to the Federal Department of Resources.

Lithium price to soar 63% this year

The department has just released its five-year outlook for a large range of commodities.

The department says the lithium spodumene price averaged US$1,532 per tonne in FY26.

For FY27, the department predicts a sharp increase of 63% to US$2,499 per tonne.

As with many other commodities, the department projects a gradual decline back to an average US$1,684 per tonne in FY31.

According to the department's outlook report:

Australian mine output is forecast to grow by around 8.8% a year to 2031, supported by expansions at existing operations and the ramp-up of new projects.

Australia's lithium export earnings are forecast to increase from nearly $10 billion in 2025–26 to over $17 billion in 2026–27 driven by higher prices and increased export volumes.

These are expected to moderate to around $15 billion by 2030–31 ($14 billion in real terms) as prices ease from current levels.

This is important information for ASX lithium shares investors because commodity prices directly impact earnings and market valuations.

Global lithium consumption is projected to grow by more than 11% a year to FY31, primarily driven by the adoption of EVs and battery energy storage systems, while supply is expected to expand by 7.3% per year.

According to the report:

Global EV sales grew by 21% in 2025, led by China and the EU. By 2031, annual sales are projected to reach around 17 million vehicles in China and 6.6 million in the EU. Growth in the United States is expected to be more moderate following the expiry of EV tax credits.

EV penetration in China is projected to rise from 53% in 2025 to 81% in 2031, while the EU rate is forecast to reach 56%, supported by vehicle emissions standards. US penetration is projected to increase more modestly to 12%.

The report flagged a risk that sodium-ion and solid-state batteries may eventually compete with lithium-ion batteries in the market.

China has imposed a 2% consumption tax on lithium-ion batteries from 1 September 2026, rising to 4% from 1 September.

Sodium-ion and solid-state batteries will remain exempt until the end of 2028, potentially supporting their development and adoption.

Which ASX lithium shares should you buy?

Morgans reiterated its buy recommendation on PLS Group Ltd (ASX: PLS) shares this week.

The broker has a 12-month share price target of $3.70, implying almost 30% upside from here.

UBS upgraded Elevra Lithium Ltd (ASX: ELV) shares to a buy rating with a $9.10 target earlier this month.

This implies more than 140% potential upside over the next 12 months.

Bell Potter reiterated its buy recommendation on Liontown Resources Ltd (ASX: LTR) shares with a $1.60 target last week.

This indicates potential gains of 130% ahead.

Morgans upgraded Mineral Resources Ltd (ASX: MIN) to a buy rating with a $65 target last week.

This implies 45% potential upside from here.

Ord Minnett upgraded Core Lithium Ltd (ASX: CXO) shares to a buy call with a 34-cent target last week.

This suggests a potential 60% upside ahead.

The post Lithium price set to soar 63% in FY27. Here's why and the ASX shares to buy appeared first on The Motley Fool Australia.

Motley Fool contributor Bronwyn Allen has positions in Core Lithium. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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