If you had an eye on the charts yesterday, you'll have seen most ASX lithium stocks take a drubbing.
Investors were quick to hit the sell button after news broke that Chinese battery giant CATL was likely to restart production at its Jianxiawo lithium mine. CATL paused production at the mine in early August after its mining license expired.
CATL had said mining would not resume for at least three months.
That suspension news led to a more than 20% increase in global lithium prices in August and offered a welcome boost to many leading ASX lithium stocks.
But yesterday's news, reported by Bloomberg which cited a person with direct knowledge of that matter who wished to remain anonymous, indicates the mine could reopen far sooner. The person said front-line workers are being recalled to the mine. Although the anonymous source added that CATL had not yet been granted a new permit.
Here's how these leading ASX lithium stocks reacted to the news on Wednesday:
- Liontown Resources Ltd (ASX: LTR) crashed 18.4%
- Pilbara Minerals Ltd (ASX: PLS) tumbled 17.3%
- IGO Ltd (ASX: IGO) dropped 14.0%
- Core Lithium Ltd (ASX: CXO) fell 6.7%, likely less impacted as its Finniss Project remains suspended awaiting better market conditions
- Mineral Resources Ltd (ASX: MIN) fell 6.3%, likely spared some of the selling due to its diversified resource base beyond lithium
And here's how they're performing in late morning trade today, with the All Ordinaries Index (ASX: XAO) down 0.2% at this same time:
- Liontown shares are up 0.7%
- Pilbara Minerals shares are up 2.8%
- IGO shares are up 1.3%
- Core Lithium shares are up 2.0%
- Mineral Resources shares are up 1.7%
It's a handy lesson that, while not always, yesterday's big share price losers can often engineer a rebound over the following trading days.
Image source: Getty Images
What are the experts saying?
Commenting on the likely earlier reopening of the CATL mine that sent ASX lithium stocks like Liontown crashing yesterday, CRU Group analyst Cameron Hughes said (quoted by Bloomberg):
This signals the Chinese government is not keen to disrupt the value chain. The ease of the renewal process is a very positive sign that we will not see similar disruptions for other lepidolite producers.
Morgans deputy head of research, Adrian Prendergast, added (quoted by The Australian Financial Review):
We continue to see long-term potential for a fundamental recovery in lithium but are sticking to our cautious investment view that the recent rally had over-priced the short-term recovery upside.
Investors should be mindful that lithium equities are likely to remain highly news-sensitive, particularly to Chinese supply signals, until clearer evidence of market balance emerges.
And Argonaut's David Franklyn reminded investors in ASX lithium stocks they should be prepared for some volatile price swings.
"The market right now is looking for guidance on supply and the Chinese market is opaque, so there's a lot of volatility," he said. "Lithium stocks have also had a good little run, so there's a chance for profit-taking."
