Bang Bang Chinese lithiumstocks surge, lifting hope rout almost...

Bang Bang

Chinese lithiumstocks surge, lifting hope rout almost done

A sudden jump in the share prices of Chinese lithium producersis spurring optimism that a rout in the electric vehicle battery metal may becoming to an end.

China’s two biggest producers — Tianqi Lithium Corp and GanfengLithium Group Co — closed up 6.5 per cent and 7 per cent, respectively, in HongKong on Wednesday. The sharp gains suggest investors may be positioning themselves for a recovery in prices

Lithium carbonate futures for January delivery on the GuangzhouFutures Exchange traded at 92,450 yuan ($US12,915) a tonne on Wednesday, downfrom more than 200,000 yuan when the bourse debuted the contracts in July.

The downward trend for lithium is “already nearing an end”, saidZhang Weixin, an analyst at China Futures Co. It’s likely to bottom out between80,000 and 90,000 yuan a tonne, he said.

While lithium prices may not go too much lower, a sharpturnaround appears unlikely. A massive expansion in supply and a slowdown ingrowth rates for EV sales have contributed to the slump, and Benchmark MineralIntelligence doesn’t expect the global market to return to deficit until 2028

“I think it’s fairly given that thelithium price will be very, very volatile,” Rio Tinto Group’s chief executive officer Jakob Stausholm said in a Bloomberg Television interview on Wednesday. “And why, because sentiment for buying EVs goes up and down.”

Spot prices of lithium carbonate, a partially processed form ofthe metal, are down more than 80 per cent from a peak last November to 98,500 yuan ($US13,761) a tonne.

Continued overcapacity in the market is inevitable, fuelled by asurge in investment seeking to benefit from increasing energy transition demandin the years ahead, Yasmin Liu, chief integration officer at Tianqui Lithium,said at an industry conference in Shanghai on Wednesday. The right strategiesto cope with price volatility are going to be key, she said.

In the longer term, the question is whether the current cycle oflower prices sees companies cancelling or delaying plans for new mines orrefineries, absent policy support from governments that are aiming to build outtheir own supply chains. Albemarle Corp., the world’s largest lithium producer,said last month that this is already starting to happen.

The plunge in lithium prices has almost reached a bottom, but anextended period of weakness is still likely, Wei Xiong, an advisor at rawmaterials trader Traxys, said at the conference in Shanghai. A turning point tomonitor is “whether high-cost mines will exit”, he said.