...if this was a normally positive article on lithium from *, you would expect it to be posted all over in lithium stock HC forums.
...but contango could turn into backwardation.
...and the article expresses caution on being too carried away with recent bullishness.
...Lithium HC forums would only post positive news on lithium, talk about honesty! And amateurish positive spins to no end, each post designed to keep everyone staying positive. That sounds like Denial 101, sorry. Eye on Lithium: Goldman Sachs reality checks lithium (again) leaving only sadness and backwardation
Mining
23 minutes ago | Rob Badman
What’s happening today with this and that, here and there, pertaining to the lithium market? Let’s find out.
Hold your horses, futures contango followers and lithium spot price bottom fanciers. That is, if you take one set of big banker analysts’ words as gospel.
And that’s because Goldman Sachs is urging caution regarding the recent lithium rally, which now appears stalled.
That said it could still hit a higher gear or move into backwardation, reversing out a tight alley at speed. Yep… could go up, could go down. Hell, sideways, too. We’ll stick to the reporting…
Tuesday was one of the worst days for the majority of lithium stocks in a while, after major lithium companies dipped alarmingly.
That said, thankfully there’s been some recovery since then for lithium prices, per last check in with Lithium Price Bot.
2024-03-05#Lithium Carbonate 99.5% Min China Spot
Price: $14,921.00
1 day: $208.20 (1.42%)
YTD: 9.06%#Spodumene Concentrate (6%, CIF China)
Price: $999.00
1 day: $12.0 (1.22%)
YTD: -24.03%
Sponsored by @portofino_porhttps://t.co/h4nTzvPdUc
— Lithium Price Bot (@LithiumPriceBot) March 5, 2024
Back to backwardation?
A good description of yesterday's trading in the Chinese futures and spot markets, and what is to come next.
In other words, be cautious, enjoy while you can, and do not overexpect anything. #Lithiumpic.twitter.com/dgNiwvmeOx
— Juan Carlos Zuleta (@jczuleta) March 5, 2024
Why did it dip, though? It’s being widely attributed to at least a couple of factors.
Firstly, the news that major global lithium player Albemarle is conducting a capital raise, per an SEC filing in which the company revealed it plans to raise US$1.9 billion through issuing 35 million new depository shares.
This has caused a stir in the US investment landscape, with knock-on effects to globally.
“This was unexpected news, as we view Albemarle’s balance sheet as healthy,” said Seth Goldstein, equities strategist at Morningstar.
Albemarle’s share price had been showing signs of recovery before plunging on the cap raise news, which left many an analyst scratching head.
With regard to Albemarle’s sell-off, Goldstein added: “We think the market is skeptical of a lithium price recovery.”
That said, he continued…
“As inventory destocking eventually ends, we expect lithium sales volumes will move closer to end-market demand, which we expect will see double-digit growth in 2024.
“As supply growth has slowed and some higher-cost supply exited the market, we expect the lithium market will revert to undersupply by the end of 2024, sending prices rising, particularly in the second half of the year. For lithium producers, including Albemarle, higher prices should provide a strong catalyst for shares to rise.”
The other factor, by the way, was a dip yesterday in the stock prices of EV big guns Tesla and BYD.
Not out of woods yet: Goldman’s bearish view
Goldman Sachs
Per a research note published overnight in the US, Goldman Sachs notes it believes it is still too early to call the end of the lithium bear market and an end to a battery raw materials price plunge in general.
For the coming 12 months, Goldman analysts said that the bank is targeting a 12%, 15% and 25% downside in cobalt, nickel and lithium carbonate, respectively.
“Despite the significant downside in battery metals prices, with nickel, lithium and cobalt prices down 60%, 80% and 65% from cycle peak, respectively, we believe it is too early to call a decisive end to these respective bear markets,” wrote the investment bank’s analysts in a note to clients.
“Margin pressures have generated a meaningful degree of supply rationing effects over the past quarter,” added the investment bank analysts.
However, here’s optimism from Citi and UBS
Citi
As reported by Carl Capolingua at Market Index, Citi analysts are also suggesting caution in their lithium outlook, despite demand growth remaining strong.
Citi says it’s “waiting on supply response at current prices”. The broker has formed a view that “lithium prices have bottomed near-term and that long-term demand growth rates remain intact”, wrote Capolingua. UBS
The Market Index analyst also highlighted another prominent UBS, which suggested that since its last update on the lithium market, “more supply has been curtailed, slowed or delayed”.
UBS has cut its outlook on expected 2024 surplus from 142kt to 94kt.
“To put this into perspective, it’s the difference between 6 weeks of market supply and just 4 weeks,” wrote Capolingua, adding:
“Reasons for the curtailment include a slowing in Chinese lepidolite supply, environmental inspections in China, delays and production cutbacks at key major producers, and ‘new projects are being pushed out’.
