Why these fundies are braving the lithium rout

Alex GluyasMarkets reporter

Jul 11, 2024 – 12.44pm

Save

Share

Gift this article

Listen to this article

5 min

An ambitious group of fund managers are betting on a resurgence in lithium stocks in the second half of this year despite fresh warnings from investment banks that prices of the battery metal could remain in freefall.

Investors are allocating money to the sector even as the price of spodumene trades below the key $US1000 level at $US950 a tonne, according to S&P Global Platts. That means prices have plummeted almost 90 per cent from their 2022 record highs.

The price collapse has plunged ASX-listed lithium stocks into a bear market, with major producers including Pilbara Minerals – the Australian sharemarket’s most shorted stock – IGO and Mineral Resources all down more than 20 per cent. Liontown Resources ranked as the worst-performing stock on the ASX 200 in the past financial year.

Chris Ellison’s Mineral Resources has been sold off in the lithium rout. Trevor Collens

But some fund managers are being tempted by the beaten-down valuations, arguing the market has been too harsh on a select group of stocks that are capable of flourishing despite the collapse in prices.

“We like the lithium sector, we think it’s oversold,” said Nathan Parkin, investment director at Ethical Partners. “The underlying fundamentals are still quite strong, but there has just been lots of noise that people put a lot of weight on, but our view is that you can look through that noise.”