Pilbara Minerals vs IGO vs Liontown: Macquarie Names Top Lithium Stocks to Buy and Avoid

After two years of price carnage that wiped out billions in market value, the lithium sector is finally stirring. Prices have jumped 20% in the past month, producers are cutting supply, and the investment banks that called the downturn are now flagging early signs of a new bull cycle.

But here's where it gets interesting: Macquarie's latest sector analysis reveals a stark divide. Some producers are positioned to capture the lion's share of the recovery, while others, including household names, are now rated as underperform or neutral despite the improving backdrop. The broker's message is clear: this isn't a rising tide that lifts all boats.

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The Lithium Market Finds Its Footing

After plunging 87% from their 2022 peak, lithium prices are stabilising. Lithium carbonate recently traded at CNY 88,900 per tonne, up 20% in a month.

The turnaround reflects real fundamentals. Global EV sales are projected to exceed 20 million units in 2025, up from 17 million last year. Meanwhile, supply discipline is finally materialising as Chinese producers curtail output and major operations suspend production.

Key market shifts:

• Oversupply narrowing: The surplus that crushed prices through 2023-24 is shrinking as high-cost producers exit
• Demand accelerating beyond EVs: Battery energy storage systems are expanding at 21% annually through 2030
• Cost curve pressure: Many producers operate at break-even or losses, forcing supply rationalisations

Macquarie now forecasts market rebalancing by 2026, with potential deficits emerging thereafter. This positions low-cost producers with strong balance sheets to capture disproportionate value.

Macquarie's Clear Buy-and-Avoid List

In a comprehensive sector note, Macquarie named three outperform picks: IGO Limited (ASX: IGO), Elevra Lithium (ASX: ELV), and Patriot Battery Metals (ASX: PMT). The broker assigned neutral ratings to Pilbara Minerals (ASX: PLS) and underperform ratings to both Mineral Resources (ASX: MIN) and Liontown Resources (ASX: LTR).

Why IGO tops the list:

IGO's stake in Greenbushes, supplying over 20% of global high-grade lithium concentrate, provides tier-one asset exposure. Macquarie projects IGO will turn profitable in FY26 with FY27 earnings tripling, driven by operating leverage to modest price improvements.

The Pilbara Minerals caution:

Despite strong operational efficiency, Macquarie maintains a neutral stance on Pilbara Minerals, suggesting the stock trades ahead of the implied lithium price recovery. Quality is undisputed, but valuation appears stretched.

Mineral Resources and Liontown underperform:

Both face headwinds beyond commodity prices. Mineral Resources carries governance concerns and capital intensity around Onslow expansion, while Liontown's newly ramped operations lack cost competitiveness in a price-sensitive environment.

What This Means for Investors

The lithium sector is entering a phase where producer quality trumps broad exposure. The gap between low-cost assets and marginal operations will widen as the market recovers.

Three priorities for lithium exposure:

• Cost positioning: Operations below US$1,200/tonne all-in sustaining costs offer protection
• Balance sheets matter: Capital raises in volatile markets mean dilution risk
• Selectivity wins: Macquarie's IGO preference shows how leadership shifts on valuation

Near-term challenges remain, Chinese capacity is substantial, policy shifts could disrupt supply, and volatility will persist. But for producers with the right cost structure, the path ahead is clearer.

The bottom line? This recovery will separate winners from survivors. Chasing the sector without considering producer quality risks, buying the wrong names at the wrong time.

Key Takeaways:

• Lithium prices have rallied 20% as market rebalancing begins
• Macquarie favours IGO, Elevra, and Patriot Battery Metals while cautioning on Pilbara and downgrading Mineral Resources and Liontown
• Producer quality and cost positioning will determine winners in the recovery phase

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