ASX lithium shares are bouncing on Thursday despite the lithium carbonate price trading at three-year lows and their peers in the materials sector lagging the market today.

The S&P/ASX All Ordinaries Index (ASX: XAO) is up 0.75% while the S&P/ASX 200 Materials Index (ASX: XMJ) is the worst-performing market sector, down 0.15%.

Here is the state of play among ASX lithium shares in mid-afternoon trading today:

• Mineral Resources Ltd (ASX: MIN) shares are up 7.66% to $37.81
• Pilbara Minerals Ltd (ASX: PLS) shares are up 5.62% to $2.82
• IGO Ltd (ASX: IGO) shares are up 4.78% to $5.38
• Arcadium Lithium CDI (ASX: LTM) shares are up 4.05% to $3.85
• Liontown Resources Ltd (ASX: LTR) shares are up 3.91% to 72 cents
• Lake Resources N.L. (ASX: LKE) shares are up 2.5% to 4.1 cents
• Core Lithium Ltd (ASX: CXO) shares are steady at 10 cents
• Sayona Mining Ltd (ASX: SYA) shares are steady at 2.7 cents

Perhaps a new lithium price prediction from Citi has ASX lithium shares investors feeling more positive today.

Let's investigate.

ASX lithium shares up amid bright new forecast

According to The Australian, Citi now predicts about a 20% to 25% rise in lithium commodity prices over the next two to three months.

Citi thinks a supply curtailment resulting from CATL suspending operations of its lepidolite mines will boost commodity values.

Citi says CATL's output accounts for about 6% of total lithium carbonate equivalent (LCE) supply. The broker also notes that recent closures and re-stocking has rebalanced the Chinese lithium market.

Citi analyst Kate McCutcheon said:

We expect investors, both inside and outside of China, to cover their shorts over the coming weeks on the back of recent supply curtailments from CATL's lepidolite cuts, inventory drawdowns, and seasonal peak demand.

We are likely to see ... prices rally to $US13,000-$US14,000 a tonne on COMEX, up from around $US11,000 at present.

Citi has lifted its 0 to 3-month price targets for lithium to $US14,000 per tonne for carbonate and $US14,200 per tonne for hydroxide.

What's the longer-term view on lithium prices?

Citi's latest forecast is short-term. While it's significant, at 20% to 25%, it may also be short-lived.

Therefore, retail investors may not see it as a reason to buy ASX lithium shares, especially if they prefer a long-term buy-and-hold strategy for their portfolio.

There has been a persistent oversupply of lithium in 2023 and 2024, which has hurt commodity values and taken ASX lithium share prices down with them.

The emergence of low-cost lepidolite in China hasn't helped, either.

As my colleague James reported last month, the lithium carbonate-China price reached an average of US$32,694 per tonne in 2023. By the start of this year, it had crashed to US$11,867 per tonne.

The lithium hydroxide-China price fell from an average of US$32,694 per tonne in 2023 to US$9,899 in January. The spodumene 6% price fell from US$3,712 per tonne in 2023 to US$1,000 per tonne in January.

Goldman Sachs is predicting average prices in 2024 of US$11,683 per tonne for lithium carbonate-China, US$11,463 per tonne for lithium hydroxide-China, and US$995 per tonne for spodumene 6%.

You can check out Goldman's longer-term forecasts through to 2027 here.

According to the latest analysis from Trading Economics:

Lithium carbonate prices steadied at the CNY 75,000 per tonne mark in September, the lowest in over three years, due to persistent concerns about an oversupplied market.

Lithium miners and producers in China continued to expand capacity and hunt for new reserves, with market players expecting global supply to soar by nearly 50% this year.

This magnified the current supply surplus amid the fallout of the battery glut due to government subsidies for firms across the supply chain.

Additionally, hopes of eventual balance in the market drove Chile to signal it would aim to double output over the next decade, and the race to secure battery metals drove China to expand projects in Africa.