Near the end of the morning session today, lithium mining stocks, led by Tianqi Lithium Corporation, suddenly surged.$TIANQI LITHIUM (09696.HK)$Hong Kong stocks once surged more than 15%, following the trend.$GANFENGLITHIUM (01772.HK)$, $BYD ELECTRONIC (00285.HK)$and followed the surge.
So, what are the good news that suddenly caused the surge of lithium futures and related stocks? According to the latest news from Bloomberg, ExxonMobil stated that despite the recent low lithium prices, lithium demand will continue to grow, which will help its traditional oil business coexist with the production of key battery materials for electric vehicles. The world's demand for lithium far exceeds the current production. At the same time, there are also rumors in the market about some hedging positions being closed out.
Sudden surge.
Possibly because it has been suppressed for too long, lithium mining concept stocks suddenly surged near the closing time this morning. Hong Kong stocks' Tianqi Lithium Corporation rose rapidly, with a surge of more than 15%, followed by Ganfeng Lithium, BYD Electronic and others. After opening in the afternoon, lithium mining concept stocks remained strong. As of the time of publication, Tianqi Lithium Corporation, Ganfeng Lithium and BYD Electronic have all risen by over 6% and over 1% respectively.
It is worth noting that the lithium carbonate futures, which have been falling for a long time, have also experienced a surge. The lithium carbonate 2407 contract on the Guangzhou Futures Exchange surged more than 5% this morning.
Some market insiders believe that the surge of lithium mining concept stocks is closely related to the strong performance of lithium carbonate futures. In fact, the trend of lithium carbonate futures was relatively strong yesterday. And according to market rumors, there are some hedging positions being closed out, leading to a strengthening of bullish sentiment.
In addition, there are also some strong positive news in terms of the news itself. Patrick Howorth, ExxonMobil's global business manager for lithium, said in an interview during an industry conference in Las Vegas, "Currently, we see a bearish sentiment in the lithium industry market. But behind it is the demand growth of lithium-ion batteries used in electric vehicles. We know that the world's demand for lithium far exceeds the current production."
ExxonMobil plans to become one of the world's largest lithium suppliers, marking the company's first major attempt outside of fossil fuels in decades. Due to oversupply and slowing demand growth, lithium prices plunged more than 80% in 2023, attracting more and more attention to this plan. After a brief rebound, this crucial battery material weakened further this month, with inventories rising again.
Howorth said ExxonMobil is committed to advancing its most competitive lithium projects as quickly as possible. He added that according to a strategic plan announced in January last year, the oil giant still plans to launch its first project by 2027, and its production will increase to the level of one million electric vehicles per year by 2030.
Howorth said that while more electric vehicles are needed during the world's transition to clean energy, there will still be a need for internal combustion engine vehicles for many years to come. Howorth is referring to gasoline-powered cars that use batteries to increase efficiency. "So I think our lithium business and oil business can coexist," he said.
ExxonMobil signed a preliminary agreement on Tuesday local time to supply its lithium mines developed in Arkansas to South Korean battery maker SK On Co., deepening its ties to the electric vehicle industry. Currently, ExxonMobil is in "active negotiations" with many potential customers for lithium supply transactions.
What about the inventory?
In the first quarter of 2024, affected by the low operation of lithium prices, some overseas lithium mining companies actively reduced production, and the supply of lithium mines fell compared with the previous period; South American salt lake lithium companies increased production in the first quarter of 2024 compared with the same period last year, SQM raised its 2024 production guidance, and with the expansion of several projects in Argentina, it is expected that the supply of salt lake lithium will continue to grow. Since the second quarter, due to the increase in the import volume of lithium salt and lithium ore, the domestic production of lithium salt has continued to increase, the supply side pressure has increased, and the demand has entered the offseason, and the lithium price has fallen below 90,000 yuan/ton. So, currently, what is the level of lithium salt inventory?
Dongzheng Futures indicated that current overseas lithium mining inventory levels are not high. In Q1 2024, Australia's concentrate inventory increased by 125,000 tons to 662,000 tons, and inventory days rose to one month. The Greenbushes mine has obvious inventory accumulation. However, considering the 200,000 tons of concentrate purchase orders added by Tianqi Lithium Corporation in April, the absolute amount and inventory days of Australia's lithium concentrate inventory will significantly decrease in Q2 2024 after the completion of shipping.
In Africa, Zimbabwe's projects have matching conversion capacity domestically, and demands for fund retrieval make the enterprises inclined to quickly bring the concentrates back to the country for sales revenue, resulting in limited local inventory. Shipping pace of low-grade ores in countries such as Nigeria are sensitive to prices. The rebound of lithium price after the Spring Festival may accelerate the transfer of inventory to the country, verifying through subsequent customs data on the shipping cycle of about 2-3 months.
The current lithium mining inventory clearance is actually the result of funds actively intervening in the trade at the mining end under the drive of excess profits and accelerating the transformation of mining inventory into the lithium salt link. At present, there is still profit in the lithium salt processing stage and newly added transformation capacities are still being gradually released. The relatively high lithium mining inventory will continue to be transformed downstream. In the short term, the clearance of this mining inventory is more like the concretization of supply pressure, and it is difficult to define it as a performance of cost support turning stronger.
Edited by Jeffrey