ASX lithium mining stocks soar due to Ningde Times suspending production, UBS predicts lithium prices will rise 11-23% in 2024
Oct,04,24
ASX lithium mining stocks soar due to Ningde Times suspending production, UBS predicts lithium prices will rise 11-23% in 2024
CATL's suspension of lithium mining operations in China has triggered a significant rebound in ASX lithium mining stocks, with Pilbara Minerals leading the gains to 17%
UBS predicts that due to the suspension of CATL, China's monthly lithium production will decrease by 8%, and lithium prices are expected to rise by 11-23% in 2024
The widespread short selling of lithium mining stocks may be one of the reasons for this sharp rebound, as Pilbara Mining Company is the stock with the most short selling on ASX
Pilbara Mining Company (ASX: PLS) is expected to achieve its best single day performance since March 2023 on Wednesday, with a surge of up to 17% in early trading. This surge followed the sudden news from China, reported by Sky Han, a Chinese lithium mining analyst at UBS
Major lithium mining and battery manufacturer CATL has officially announced the suspension of its lithium mica operations in Jiangxi. Although rumors about CATL cutting or suspending lithium production in Jiangxi have been circulating before, UBS has expressed higher confidence this time. Based on their channel verification with several contacts, CATL made the decision to suspend operations after the meeting on September 10th.
Interestingly, this news did not affect Tuesday's trading. The futures price of lithium carbonate in China remained unchanged at 72400 yuan per ton, while local lithium mining companies such as Ganfeng and Tianqi fell by 1.5% and 3.6% respectively
importance
UBS pointed out that since mid July 2024, the spot price of lithium has been consistently lower than CATL's cash cost level. Although they previously believed that CATL would tolerate losses in its lithium business, the company has decided to suspend operations after two months of losses, considering the risk of continued lithium price declines, which represents a normal supply response from marginal cost producers.
It is expected that the suspension of CATL production will result in an 8% reduction in China's monthly lithium carbonate equivalent production, approximately 5-6000 tons. Therefore, UBS predicts that this will have a positive impact on lithium prices, with lithium prices expected to rise by 11-23% for the remainder of 2024
The current trading price of Chinese lithium carbonate futures has risen by 5.5% to per ton
ASX lithium mining stocks soar
On Wednesday, local lithium mining stocks experienced a rare comprehensive rise, led by Mineral Resources
Short selling replenishment
Over the past two years, short sellers have been heavily shorting lithium mining stocks
As of September 4, 2024, data shows that Pilbara Mining Company has become the stock with the highest proportion of short selling in the market
Although the medium-term outlook for lithium ore is still uncertain, the recent unexpected decrease in supply has triggered a significant rebound in stock prices. The sudden rise in stock prices often prompts short sellers to repurchase stocks
