It's been a rough day for the markets so far this Wednesday. At the time of writing, the S&P/ASX 200 Index (ASX: XJO) has dropped 0.2% and is back below 8,000 points. But let's talk about what's going on with ASX lithium shares.
In stark contrast to the broader market, ASX lithium shares are surging today. Take the ASX's largest lithium stock, Pilbara Minerals Ltd (ASX: PLS). Pilbara shares are currently up a hefty 15% at $2.72.
Arcadium Lithium plc (ASX: LTM) shares have risen 12.65% to $3.74.
Core Lithium Ltd (ASX: CXO) has bounced 13.64% to 10 cents, while Sayona Mining Ltd (ASX: SYA) has lifted 8.7% to 2.5 cents.
And Mineral Resources Ltd (ASX: MIN) is leading the pack, currently up a whopping 19.7% at $36.26 a share.
So what on earth is going on here?
Why are ASX lithium shares surging this Wednesday?
Well, there are a couple of potential catalysts for these decisive moves higher.
Firstly, as we covered this morning, Mineral Resources has just received some exciting news. The company revealed that the Australian Foreign Investment Review Board has provided unconditional approval for its sale of a 49% stake in its Onslow Iron project to a consortium of investment funds.
Mineral Resources will receive $1.1 billion in cash and a conditional deferred cash amount for the transaction.
Judging by the enthusiastic share price response, this news has delighted investors. As a leading ASX lithium share, Mineral Resources' success may be lifting all lithium boats this session.
Secondly, as discussed by the Australian Financial Review (AFR) today, reports are circulating that a Chinese electric vehicle battery manufacturer, CATL, has suspended production at two of its lepidolite lithium mines. If this proves to be the case, the closure of Chinese lithium mines would be good news for ASX lithium shares, as it would probably result in a reduction in supply and subsequently push up prices.
Thirdly, many ASX lithium shares are currently being heavily short-sold. Just this Monday, my Fool colleague James covered the ASX 200's most shorted shares. Of those top ten, Pilbara Minerals was right at the top, with 20.4% of its outstanding shares held in a short position. Another ASX lithium share, Sayona Mining, also made the top 10.
When a short seller holds a company's shares, they benefit when the shares fall in value. But if they experience a sharp rise, these shorters often have to sell out of their positions to reduce risk.
This can have a compounding effect known as a short squeeze. This also could also be what is helping these ASX lithium shares to surge in value this Wednesday.
Whatever the cause — or causes — of the surge, it has no doubt delighted ASX lithium investors today.
