Investors turn bullish on lithium companies ahead of China's 2020 NEV policy

Equity investors have turned more bullish on lithium miners and processors in 2020 so far, helped by a shift in Chinese electric vehicle (EV) policy.

The improved investor confidence could mean a more positive outlook on lithium pricing is developing, after a very bearish 2019.
On January 11, China’s minister of Ministry of Industry and Information Technology (MIIT), Miao Wei, announced there would be no major reduction in the new energy vehicle (NEV) subsidy in 2020.
Over the coming year, government policy will aim to stabilize market expectations, guarantee healthy and sustainable development, and build confidence in the NEV industry, Miao said. The final details of this policy have not yet been released.
Chinese NEV policy is a key driver of battery mineral markets, including cobalt, graphite and lithium.
William Adams, head of base metals and battery research at Fastmarkets, said the news was positive for lithium and EV markets. “It suggests the EV market will not have to suffer another subsidy shock before it has got over the 2019 shock.”
In 2019, a cut to Chinese NEV subsidies weighed heavy on a market already dealing with a surge in new supply. Chinese NEV production fell by 2.3% year on year in 2019, to 1.24 million, according to data released by the China Association of Automobile Manufacturers (CAAM). Total sales fell by 4.0% to 1.206 million units.
Fastmarkets’ weekly price assessment for lithium carbonate, 99.5% Li2CO3 min, battery grade, spot price range exw domestic China was 45,000-51,000 yuan per tonne on Thursday January 9, down by 39.2% from 75,000-83,000 yuan per tonne at the beginning of 2019.
Increased investor interest was apparent in the sharp increase in share prices of a number of the largest lithium producers including Ganfeng, Tianqi and SQM.
The trend extended a more bullish picture that is developing in lithium equity, despite the flat prices so far this year.
At time of writing, SQM shares are up about 15% since the start of 2020.
Shares in Tianqi are up 7.8% so far this year, while Ganfeng shares are up by 18.7% so far.
“We are starting to see some month-on-month pick-up in EV sales and with the whole auto market in China in decline for 18 months, you can imagine that there is pent-up demand building,” Adams said.
“We think the recovery will be EV-heavy, which will be good for demand for lithium products and lithium processors.”

William Clarke

william.clarke@fastmarkets.com

Published

William Clarke

January 15, 2020

15:51 GMT

London