Why the lithium miners are bouncing back

Although the market is heading lower today, one area certainly has not let that hold it back – the lithium miners.

Here is the state of play in the lithium miner industry:

  • The Altura Mining Ltd (ASX: AJM) share price is down 1% to 46 cents, but up over 7% week-to-date.
  • The Galaxy Resources Limited (ASX: GXY) share price is up 1.5% to $3.40.
  • The Kidman Resources Ltd (ASX: KDR) share price is down 0.5% today, but up 9% this week.
  • The Lepidico Ltd (ASX: LPD) share price is 2% higher to 4.7 cents.
  • The Mineral Resources Limited (ASX: MIN) share price is up over 4% to $18.58.
  • The Orocobre Limited (ASX: ORE) share price has climbed 3.5% to $6.03.
  • The Pilbara Minerals Ltd (ASX: PLS) share price is 0.5% higher to 91 cents.
  • The Tawana Resources N.L. (ASX: TAW) share price has climbed 2% to 45 cents.

What happened?

The lithium miners have come under a lot of pressure over the last few weeks after Morgan Stanley warned that future lithium prices could be half what they are today.

While this hit sentiment hard initially, it appears to have recovered now. One key reason for this could be a report from Bloomberg this week.

According to the report, metals analyst Chris Berry from House Mountain Partner expects the industry to see a mergers and acquisitions bonanza in the near future. China is expected to lead activity as its battery and auto companies seek to wrest more control of the market from Western rivals.

Demand for lithium in China is expected to grow exponentially as electric vehicle sales accelerate. China’s government has set a target of 7 million electric vehicles on its road by 2025 as part of a plan to cut down on pollution.

Last year the country accounted for more than half of global electric vehicle sales last year, which exceeded 1 million for the first time.

Should you buy the lithium miners?

Whilst I think all the lithium miners mentioned above could have bright futures, at this point I think the ones that are already producing are the most attractive. In light of this, my top pick remains Galaxy. Though it is worth remembering that these shares are amongst the most volatile on the local share market.

It's not just the lithium miners that are set to grow strongly in the future. These top growth stocks also have the wind in their sails.

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Motley Fool contributor James Mickleboro owns shares of Galaxy Resources Limited. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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