China's lithium stocks rally, hinting at market...

China's lithium stocks rally, hinting at market rebound
Published: 14:31 07 Dec 2023 AEDT
Written by: Tharun George, CFA
About this content






Great news for Lithium! up 6.5 & 7% on Wednesday (China )

View
Proactive Australia

A quick upturn in the share prices of lithium producers in China has fuelled hope for a recovery from the recent slump in the price of the electric vehicle battery metal. Tianqi Lithium Corp and Ganfeng Lithium Group Co, China's two largest lithium producers, experienced sharp gains in their share prices, closing up 6.5% and 7% respectively in Hong Kong trading on Wednesday.

This uptick in investor confidence appears to be in anticipation of a recovery in lithium prices, w( hich have seen a considerable drop in recent times. The price of lithium carbonate futures for January delivery on the Guangzhou Futures Exchange was quoted at 92,450 yuan (~US$12,915) per tonne on Wednesday, a decrease from highs of over 200,000 yuan earlier in the year.


The spot price for lithium carbonate has fallen over 80% from its peak last November, currently standing at 98,500 yuan (about US$13,761) per tonne. Yasmin Liu, Chief Integration Officer at Tianqui Lithium, highlighted the inevitability of continued market overcapacity, driven by increased investment in anticipation of future energy transition demands. Liu stressed the importance of strategic planning to manage price volatility effectively.

Zhang Weixin, an analyst at China Futures Co, suggests that the downturn in lithium prices is nearing its end, estimating a likely bottoming out between 80,000 and 90,000 yuan per tonne. However, experts caution against expecting a rapid rebound. Factors such as an expansion in supply and slowing EV sales growth rates have contributed to the current slump.

Long-term outlook depends on supply
The long-term outlook for the lithium market hinges on how the current cycle of lower prices impacts the development of new mines and refineries. Albemarle Corp, the world's largest lithium producer, has reported that companies are already beginning to cancel or delay such plans, a trend that could be influenced by government policies aimed at establishing independent supply chains.

In conclusion, the lithium market is approaching a pivotal moment, with experts closely monitoring the potential exit of high-cost mines, as noted by Wei Xiong, an adviser at raw materials trader Traxys, during a recent industry conference in Shanghai. The overall sentiment suggests cautious optimism, tempered by an awareness of the market's inherent volatility and the broader economic factors at play.