We suggested at the start of the year that Aussie lithium miners were approaching a bottom.
But, COVID-19 chaos roiled markets and pushed the share prices of a number of Aussie lithium miners further south.
This time, we look at what’s happening in the lithium space with an eye on the future of ASX lithium stocks.
China dominates the lithium market producing lithium-ion batteries for some of the world’s largest companies, including Tesla Inc [NASDAQ:TSLA].
No doubt, the world is becoming increasingly electrified.
Not only are developing countries increasing the availability of electricity to their populations, but the electrification of existing transportation infrastructure is proceeding at a rapid pace.
By 2040, over half of the cars on the roads are projected to be powered by electricity.
China recently suffered a massive blow to its economy from the emergence of COVID-19 slowing down manufacturing, so what does this mean for Australia’s lithium miners?
Galaxy, Orocobre, and Pilbara Minerals
Australian lithium miners all came to life in January 2020, moving up in price. Orocobre Ltd [ASX:ORE] being the star performer, up over 46% from $2.70 in December 2019, to a high of $3.96 in mid-January 2020.
Source: Optuma
Both Pilbara Minerals Ltd [ASX:PLS] (first chart) and Galaxy Resources Ltd [ASX:GXY] (second chart) recorded impressive gains of 44.21% and 38.14%, respectively.
Source: Optuma
Source: Optuma
All three miners realised losses in price with the outbreak of COVID-19, but there is hope on the horizon for Australian lithium…
Coronavirus, Argentina, and lithium
Argentina, Chile, and Bolivia hold 70% of the world’s reserves of the soft, silvery metal. But Chile is not currently granting new concessions, and Bolivia has suspended lithium mining after opposition from local residents around the Salar de Uyuni salt flats, which hold enormous lithium deposits.
‘Argentina has, in the provinces of Catamarca, Salta and Jujuy, the most fantastic quantity and quality of lithium the world can boast today,’ Argentine mining secretary Jorge Mayoral said.
Here is where things get interesting. China needs vast amounts of lithium for battery production. Tesla being a massive producer of electric cars, having a factory in Shanghai and China, needs to keep producing cars despite COVID-19.
China has now bent over backwards to help Tesla get back to work as Beijing pushed local authorities to get the country back to work last month, officials in Lingang singled out Tesla as an example of their success in helping the area’s industry to recover.
‘Given Tesla’s image of having advanced electric-vehicle technology and expected strong demand for made-in-China Tesla Model 3s this year, no local government anywhere in the world would neglect such a new project,’ said Yale Zhang, founder of AutoForesight, a Shanghai-based consultancy.
Now that Argentina is in lockdown and trying to avoid a costly default on overseas debt, prices may rise, or the market may shift towards Australian spodumene. Pilbara Minerals said on Wednesday it had signed a five-year deal to supply spodumene concentrate, a mineral mined for its lithium content, to China-based Yibin Tianyi. This may be the shot in the arm Australian lithium miners need…
What does the future hold for Aussie lithium miners…
Across the charts all three miners moved up strongly in January 2020, only to then fall away with the rest of the market.
Source: Optuma
At the time of writing Orocobre, Pilbara Minerals, and Galaxy Resources have found support resisting a greater fall in price. In the case of Pilbara Minerals, with the announcement of the new five-year agreement price has started to move back up in the last week.
Source: Optuma
China is now looking to move its people back to work. You would think that more work will require more lithium for Tesla and the likes. With this in mind, 2020 may be a promising year for Australian lithium miners…
Regards,
Carl Wittkopp,
For Money Morning
PS: Is Lithium Ready for a New Bull Run in 2020? Download your report now.
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