Further rebound in lithium prices requires more supply to exit the market
Oct,04,24
Further rebound in lithium prices requires more supply to exit the market
Lithium mining stocks are experiencing upward pressure after China CATL suspended production in its main operating locations.
However, analysts suggest not to be overly optimistic, as the market requires more supply exits to justify higher prices.
According to a report by UBS, CATL mines account for approximately 5% of global primary lithium supply and are expected to become the world's fifth largest mine by 2025. Despite the closure of mines, it is expected that the lithium market will continue to experience oversupply until 2025.
Analysts from UBS Group warn that "today's news is positive, but we need to see more supply exit the market to address our oversupply problem in 2025." They remain cautious about supply growth in Africa.
From a pricing perspective, analysts expect the price of lithium carbonate to be around one ton This is based on the global cash cost and CATL cost base (approximately per ton...). But if prices rise too quickly, CATL may resume its lithium mine operations.
They also believe that the price of spodumene may rebound to one ton in the short term, Higher than the current spot price of $730 per ton.
Citi also holds a similar view, believing that "more supply cuts are needed to rebalance the market
Although the market is far from showing a deficit, Citigroup pointed out that "with the news of supply cuts
Despite analysts' cautious attitude, lithium mining stocks like Pilbara Minerals (ASX: PLS) have risen by about 20% in the past two trading days. This marks the best two-day consecutive increase since January 2023, when its December quarterly report showed a 62% increase in cash to $2.2 billion and plans for its first dividend payout.
Two day performance summary
Be wary of short sellers
