Lithium Supply Concerns Boost Australian Miners' Stocks
Shares of major Australian lithium miners saw an uptick on Monday amid unconfirmed reports that Chinese battery maker CATL had closed a significant lithium mine in mainland China. This development suggests potential tighter supplies in the market.
Lithium mining companies such as Pilbara Minerals Ltd, Piedmont Lithium Ltd, Liontown Resources Ltd, Arcadium Lithium PLC DRC, and Mineral Resources Ltd all experienced gains ranging between 0.8% and 5% following a positive session on Friday.
According to an unconfirmed report by Australian investment bank Barrenjoey, CATL decided to shut down its Jianxiawo lithium mine before the Lunar New Year holiday. This decision was purportedly due to high production costs and falling lithium prices. If confirmed, this shutdown could result in a reduction of 3% of the global lithium supply. Consequently, the market may face tighter conditions, potentially leading to an increase in lithium prices.
CATL holds the distinction of being one of the largest lithium producers globally. Over the past year, lithium prices have plummeted by around 80% due to weakening demand for electric vehicles, thus impacting the profitability of major lithium producers. Australian lithium stocks have been adversely affected by the declining battery-making material prices.
However, Australian lithium mining companies have recently recorded significant gains following the positive earnings report of Albemarle Corp, the world's largest lithium producer. Albemarle Corp expects lithium demand to triple by 2030, thereby driving up prices.
The closure of CATL's lithium mine and the positive outlook from Albemarle Corp have sparked optimism in the Australian lithium market. Moving forward, investors will be closely monitoring the developments in the lithium supply chain.
Analyst comment
Positive news: Shares of major Australian lithium miners rose due to reports of a major lithium mine closure in China, potentially leading to tighter supplies. This could result in market conditions becoming much tighter and potentially causing gains in lithium prices. The shutdown could potentially impact 3% of global lithium supply.
