S&P/ASX 200 Index (ASX: XJO) lithium shares have delivered some stellar returns over the past year.
But the last few weeks have left some investors wondering if the party is coming to an end for the big lithium companies.
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What's been happening with the big lithium stocks?
In November, only two of the five ASX 200 lithium shares posted gains, while the benchmark index leapt 6.1% higher over the month.
This was despite several of the miners hitting new all-time highs earlier in the month amid record prices for the battery-critical metal. Then lithium prices began to slide.
Now, as we approach the end of the third day of trading in December, it looks like the selling trend from the past few weeks may be reversing. At least for some.
Here's how the top ASX 200 lithium shares have performed since the closing bell on 30 November:
- Core Lithium Ltd (ASX: CXO) shares are down 2.1%
- Allkem Ltd (ASX: AKE) shares are up 4.6%
- Pilbara Minerals Ltd (ASX: PLS) shares have gained 1.3%
- IGO Ltd (ASX: IGO) shares are up 2.9%
- Mineral Resources Ltd (ASX: MIN) shares have gained 4.3%
For some context, the ASX 200 is up 0.7% over this same period.
Can ASX 200 lithium shares come charging back in December?
With the exception of Mineral Resources – hands down the best-performing ASX 200 lithium share in November with a 19.5% share price gain – the rest of the pack struggled with a dip in lithium prices.
Most of that's been due to some headwinds blowing out of China, the world's biggest electric vehicle (EV) producer.
China's economy-hampering COVID zero policies have given some investors in lithium stocks the jitters. Especially as infection numbers in the nation soared and rare anti-government protests broke out across major cities.
2023 is also likely to see the Chinese government axe its subsidies to domestic battery manufacturers. And the government has flagged an end to rebates for consumers purchasing new EVs.
Add to that reports that Chinese battery manufacturers look to have overproduced the near-term needs of EV manufacturers and you can see why lithium prices, and ASX 200 lithium shares, have come under pressure recently.
Which brings us back to the outlook for December.
China may well end its EV subsidies and there may be some short-term battery oversupply issues making the news this month. In turn, this could put some pressure on the big lithium stocks.
However, over the weekend, the Chinese government did an extraordinary backflip on its pandemic containment policies.
While some restrictions remain, officials have bowed to protester demands and are turning their attention more towards growing the economy than stamping out the virus.
An end (or near-end) to lockdowns should offer a healthy boost to China's mammoth manufacturing sector. And we suspect this will also see more analysts upgrading their near-term forecasts for lithium demand.
Which could mean good news for ASX 200 lithium shares in December.
