Lithium – China lithium stocks rally on prospects for market...

Lithium – China lithium stocks rally on prospects for market rebound whilst spot prices continue to fall

• Ganfeng has rallied 11% overnight, Tianqi up 7%, Tibet Mineral Development up 10%, Zhejiang Cobalt up 7% and Qinghai Salt Lake up 6%.
• Australian producers Pilbara Minerals, Pilbara and Allkem all staged rallies.
• The rally has come despite lithium carbonate prices slumping to below $13,000/t in the spot market and spodumene prices touching $1,380/t.
• Chinese analysts are noting that current lithium prices seem overextended to the downside, given their proximity to the upper quartile of the cost curve and expectations of imminent resocking.
• Fund managers are likely positioning in the expectation of a reversal in lithium prices going into the new year.
• The rally follows a swathe of bulge bracket banks initiating bearish calls on prices and the sector for 2024 on rising supply.
• Lithium carbonate prices have fallen to two-year lows in China.
• On the other hand, Q1 is historically a weak lithium carbonate season for consumption. However, the rapid uptake of EVs and Li-ion battery demand is expected to muddy historical seasonality pictures.
• SMM reports several lithium refiners in China have been forced to halt production on negative margins.
• Short interest on the Guangzhou Futures Exchange is elevated and holds the potential for short covering.
• Chile’s Enami notes that lower prices are expected to hit supply growth, whilst demand growth remains intact.