Long-suffering investors in lithium stocks had lots to cheer about after yesterday’s news of two key mine closures in China - forced by regulators – ignited speculation that the surplus, which has kept prices low for the best part of three years, could now be closing.
Based on expectations of China supply cuts widening further over the next 6-12 months, analysts with UBS’ lithium team upped their near-term spodumene prices 9-32% and carbonate and hydroxide prices by 4–17% across the 2025–28 period.
According to UBS analyst Lachlan Shaw and Hong Kong-based lithium expert Sky Han, up to 240,000tpa of lithium carbonate equivalent – accounting for 15% of global supply – could be at risk.
It’s understood that the potential disruptions include suspensions at operations such as Zangge Mining, Chinese battery manufacturer CATL’s Jianxiawo mine, multiple Yichun lepidolite operations and Citic Guoan’s brine project in Qinghai.
Based on UBS projections, the CATL’s Jianxiawo mine is expected to remain offline for around 12 months, Zangge for 1–2 months, while there are also plans for further mine shutdowns at Yichun from late September, and production cuts at Citic Guoan.
Lithium prices surged as high as US$80,000/tonne and above for battery chemicals and US$8000/tonne for the hard rock concentrate known as spodumene – the kind produced by Aussie miners – during a post-covid electric vehicle boom in 2021 and 2022.
However, these price hikes were short-lived following a material spike in supply from Australia, Africa, South America and China, which sent prices for chemicals crashing to the low US$8000/tonne mark and spodumene to under US$600/tonne earlier this year.
However, lithium carbonate prices have been on an upward trend since July after battery giant CATL was forced to idle its Jianxiawo lepidolite mine, after the suspension of a series of operations run by Zijin subsidiary Zangge Mining in Qinghai.
Equally encouraging, demand signals for EVs are improving with sales up 26% year on year in June, with China growing 31%.
The energy storage story is also growing with the project pipeline for 2025-2030 up 117% year on year to 1.7TWh.
Meanwhile, what prompted yet another price upgrade from UBS was revelations that an additional seven lepidolite mines in Yichun - amounting to 6% of global lithium carbonate equivalent supply - could be cut, along with Citic Guoan’s brine ops in Qinghai, which runs the risk of going over its production quota.
As a result, UBS expects lithium carbonate prices to go to 100,000RMB/tonne in China next year (US$13,980/t) while the spodumene price is forecast to jump 32% to US$1250/tonne in 2026, 10% to US$1150/tonne in 2027 and 23% to US$1350/tonne in 2028.
Meanwhile, UBS’ long-term price remains unchanged at US$1200/tonne, 9% below the long-term consensus of US$1313/tonne.
Unsurprisingly, in response to UBS’ price upgrades, most stocks in the sector moved higher.
Current lithium carbonate spot price sits at US$11,388.06/t, with 6% Li2O spodumene at US$920/tonne.
While Core Lithium (ASX: CXO) came under heavy selling pressure in November 2022 amid fast-falling lithium prices, the lithium miner’s shares have surged around 25% since 23 June.
However, the stock came under selling pressure when it resumed trading today – down 12.5% to $0.105 – after announcing a $50 million institutional placement and the launch of a share purchase plan (SPP).
The company clearly thinks it can offset short-term shareholder dilution with future shareholder value generated from critical minerals exploration and mining projects.
The proceeds from the placement will be used to accelerate the Finniss Lithium Project towards a positive final investment decision (FID).
This includes ordering long-lead items, recommencing BP33 boxcut and decline development, undertaking operational readiness activities, and strengthening the company’s balance sheet. SPP funds will be allocated to additional working capital.
Core Lithium has a market cap of $235 million; the share price is up 23% year to date.
The stock appears to be in a strong bullish trend, confirmed by multiple indicators.
Consensus is Moderate Buy.
This article does not constitute financial or product advice. You should consider independent advice before making financial decisions.
