General Markets Talk

[Kram]

Finally a good day for lithium...

 

[Kram]

Lithium stocks surge as Chinese giant suspends major mine

Pilbara Minerals (ASX: PLS) is on track to record its best day since March 2023 after rallying as much as 17% in early trade on Wednesday.

www.marketindex.com.au

 

[Kram]

Chanticleer

Lithium finds a bottom, but beware Chinese whispers and false dawns​

It only took a rumour to set a fire under global lithium stocks. There’s more drama and pain ahead for the sector, but at least true believers have hope now.

Sep 12, 2024 – 5.00am



In the mining game, nothing cures low prices like low prices. Just look at Wednesday’s startling global rally in lithium stocks, which was sparked by the mere suggestion that a major Chinese lithium company could be closing one of its mines.
Shares in Pilbara Minerals and Liontown Resources surged 13 per cent, and Mineral Resources bounced 16 per cent following reports that Chinese electric vehicle battery maker CATL may have suspended lepidolite mining and closed a lithium carbonate production line in response to tumbling lithium prices and weakened demand.

EV demand and oversupply has hit lithium prices hard. David Rowe
Now, those reports remain unconfirmed, and it should be noted that rumours of similar curtailments have been doing the rounds recently. But the industry scuttlebutt was strong enough for both Citi and UBS to tell clients that sentiment around the beaten-up sector could be about to change.
And that’s exactly what happened. The share price jumps in Australia were mirrored by similar moves in China, where lithium stocks, including Tianqi and Ganfeng both jumped 10 per cent.
The moves in Australia were clearly helped by short covering; a staggering 20.3 per cent of Pilbara stock is in the hands of short-sellers, while at Liontown and Mineral Resources, short holdings sit around 10 per cent and 8 per cent respectively. The volume of most lithium stocks traded on the ASX on Wednesday was three times higher than usual.

For the brave souls who have been betting on a turnaround in the fortunes of lithium stocks, including L1 Capital and Tribeca, this was a nice little win. But it’s important to remember just how much pain the investors in these stocks have had to endure.
Shares in Mineral Resources, which has also announced a major cost-cutting program, are still down 30 per cent in the last month, for example, while Pilbara and Liontown are down 33 per cent and 44 per cent respectively over the last six months.
Still, there are a few signs of hope for investors to cling on to.
The first is that the CATL rumours are evidence that the supply curtailments the lithium market needs are gaining pace.
Just days ago, Nasdaq-listed Arcadium told investors it would put its Mt Cattlin mine in Western Australia into care and maintenance by the middle of 2025, having already paused its projects in Canada and delayed the expansion of an Argentinian mine.
Piedmont Lithium has delayed its US Carolina project by two years, US giant Albemarle has repeatedly scaled back expansion plans at its Kemerton hydroxide refinery in Western Australia, and Core Lithium has suspended mining at its Northern Territory mine.

The pressure for more closures has been mounting as the spodumene price has fallen from an average of $US1152 a tonne during the June quarter, to about $US750 a tonne. (For those playing at home, spodumene prices peaked at $US6400 per tonne in December 2022.)
Citi recently estimated just one spodumene mine – the famously low-cost Greenbushes mine, owned by Albemarle, the ASX-listed IGO and China’s Tianqi – was profitable at current spot prices, and so everyone in the sector has been waiting for more shutdowns, including Wesfarmers chief executive Rob Scott.
His conglomerate is trying to get its lithium mine, concentrator and refinery project off the ground, and told this column last month he expected more pain.
“From what we understand, nearly half of the spodumene producers in the market are loss-making at the current prices … So that may, over the next few years, lead to a change in pricing, which would be good.”
It’s pricing that is the second sign of hope for the lithium believers. Lithium futures rose about 6 per cent on the CATL rumours, and some analysts are taking as evidence the lithium price has found a floor around $US800 a tonne for spodumene.
In the early months of the year, prices got down to around this level before bouncing back to $US1200. The hope is that prices are now heading back to that level again, implying gains of about 50 per cent, and cementing $US800 a tonne as the bottom of the market.

UBS was moved to declare on Wednesday that Chinese lithium prices had bottomed, although both it and Citi fully expect CATL will turn its mines back on if Chinese prices rise 30 per cent – back to levels seen in the middle of this year.
That suggests to us there is a danger that Wednesday’s rally proves to be a false dawn, and there will be more ups and downs for the lithium sector in the next couple of years.
Remember, there’s a demand story at play here too, given sales of electric vehicles appear to be moderating.
But after a tough 12 months, the lithium sector and its true believers are entitled to enjoy a moment in the sun.

 

[Kram]

TRE going good, nearly doubled my money.

STK is another one I might look at over the weekend for a punt.