Already a subscriber?An army of hedge funds targeting ASX-listed lithium stocks are scrambling to cover their aggressive short positions following reports that Chinese electric vehicle battery maker CATL has suspended two of its mines in China.
“After making a loss for two months in lithium business and continuous downside risk on lithium price, we finally see normal supply response from a marginal-cost producer,” Ms Han wrote in a note to clients. “The rally we’re seeing today is almost 100 per cent short covering,” said Tribeca portfolio manager Ben Cleary. “Supply coming out of the market is exactly what the lithium market needs, so there is plenty of room for this rebound to run given how hard the stocks have been hit.”Lithium prices have dived to the lowest since 2021 as soft demand from China and waning appetite for electric vehicles collided with an oversupply of the battery material, leading to elevated inventories.
“We see near-term sentiment uplift to lithium prices, helped too by the traditional September-October peak season,” said Citi analyst Jack Shang. “These should accelerate the lithium destocking process as well.”CLSA analyst James McIntosh warned that CATL may resume production once prices rose slightly, but added that the 70,000 yuan per tonne level might become accepted as the bottom of the market.