Lithium stocks smashed: Why Pilbara Minerals and Liontown shares are tanking today
Chinese mine restart sends lithium stocks plunging, with Pilbara Minerals and Liontown both down more than 10% on Wednesday.
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Mentioned
KEY POINTS
- CATL's Jiangxi mine is restarting production sooner than expected after resolving permit issues, representing 3% of global mined lithium output.
- Major lithium stocks are down 10-15% with Chinese lithium carbonate prices falling 2.6% to 72,900 yuan per tonne on Wednesday.
- Analysts see limited near-term upside for lithium prices without additional mine closures, as Chinese production continues growing month-on-month.
It's a sea of red for lithium stocks, with household names like Pilbara Minerals and Liontown Resources down more than 10% on Wednesday.
"A Chinese lithium mine that pushed up battery-metal prices when it halted production last month is now gearing up to restart sooner than previously anticipated," Bloomberg reported last night.
The move sent Chinese lithium carbonate prices 2.6% lower to 72,900 yuan a tonne on Wednesday, while major lithium producers SQM and Albemarle Corp tumbled 8.8% and 11% respectively overnight.
CATL is back
CATL had suspended production at its Jiangxi mine for at least three months after failing to extend a key mining permit, according to Bloomberg. The mine's closure was significant for global markets, with production accounting for approximately 3% of the world's mined lithium output.
A bellwether name like Pilbara Minerals rallied 19.6% on the day of the announcement (green circle on 11-Aug).
Pilbara Minerals daily price chart (Source: TradingView)
Despite today's 15% selloff, Pilbara is still trading around 6.2% above pre-suspension levels.
Limited near-term upside
Barrenjoey sees limited near-term upside in lithium prices, in the absence of further mine closures.
"Prices and sentiment have remained highly volatile as the market ponders the likelihood of further closures resulting from permitting concerns at Yichun mines under permit review," the analysts said in a note this morning.
"However, monthly data has shown continued month-on-month growth in lithium production in China due to a resurgence in spodumene conversion ... limiting further upside on lithium prices, in our view, if no additional mine shuts are announced."
Potential takeaways
With lithium miners trading broadly lower, it appears the recent rally was driven more by speculation than by fundamentals such as stronger demand or reduced supply. Lithium prices have already fallen sharply from recent highs, with Chinese lithium carbonate futures now around 72,900 yuan a tonne, down 20% from the 18 August peak of 90,100 yuan.
Encouragingly, Pilbara still trades around 70% above its June lows, while Chinese carbonate futures remain 25% higher than recent troughs.
For now, the sector sits in a wait-and-see phase. Lithium prices and miners appear to have bottomed after a two-year spiral, but today’s news and price action cast doubt on the prospect of meaningful upside.
