The volatility in ASX lithium shares continued for a second day following their big plunge on Wednesday.

The Pilbara Minerals Ltd (ASX: PLS) share price and Allkem Ltd (ASX: AKE) share price flip flopped between gains and losses as other brokers weighed in on the sector.

Yesterday’s huge sell-off was triggered by Goldman Sachs, which warned that the lithium boom was over.

Less panic in ASX lithium share prices

But comments from other brokers may have helped temper the panic. Credit Suisse is not exactly a lithium bull as it changed its mind about the lithium market being in deficit over the coming years.

It now sees a more balanced lithium market in 2023 and 2024 with the chance of surplus supply from 2025.

That’s not normally good news, but it sounds bullish after Goldman’s prediction that lithium prices will crash to US$16,372 a tonne in 2023. The lithium spot price is currently standing at around US$50,000 a tonne.

When a downgrade feels like an upgrade

In contrast, Credit Suisse downgraded its 2023 spot lithium carbonate forecasts by “only” 12%. This is mainly due to a faster than expected supply response due to high commodity prices and slowing demand.

This sombre outlook prompted Credit Suisse to encourage investors to take profit on the Pilbara Minerals and Allkem share prices. In fact, the broker downgraded both shares to “neutral”.

Are the Allkem share price and Pilbara Minerals share price cheap?

The silver lining is that the brokers’ lowered price targets on both ASX lithium shares are higher than where they are currently. The 12-month price target on Pilbara Minerals is $3 a share and Allkem is $14.70 a share.

But the broker admits it could be too conservative on its lithium outlook if electric vehicle (EV) sales were to be stronger than anticipated. Credit Suisse said:

A 10% higher EV penetration would see 30-60kt supply deficits remain in 2023-24, sustaining price strength longer than our base case (implying global EV penetration of 26% vs base case 24% in 2025).

We revise up long term prices to account for cost inflation in our LT incentive price models.

EV sales boom not over

Coincidentally, Macquarie noted that sales of light EVs were up 65% year-on-year from January to April 2022. In contrast, traditional light combustion engine vehicles fell 11% during the period.

Macquarie commented:

There are growing signs of a major correction in prices for lithium, nickel and cobalt after the boom of the past year, reflecting mainly China slowdown.

For cobalt and lithium, this could be temporary once China bounces back while nickel prices could continue to fall due to rising Indonesian supply.

Further support for ASX lithium share prices

Meanwhile, some believe that Argentine customs’ decision to set a reference price for lithium exports also contributed to yesterday’s dramatic falls. But Citigroup doesn’t believe this is much of a threat.

The reference price of US$53,000 at tonne4 for lithium carbonate does not set a floor or a ceiling price for the commodity. It’s used only in instances where there is a large variance in contract pricing for exports.

While Citi is also expecting prices to ease in the coming years, its analysts are not painting as grim a picture as Goldman.

Citi is forecasting the lithium price to average around US$35,000 a tonne through to 2025. The broker added:

We remain positive on the lithium sector given this is still an extremely high price relative to miners production costs, especially compared to other markets, and historical prices.