A sudden surge in shares of Chinese lithium producers is fuelling optimism that the downtrend in the metal, which is used in electric-car batteries, may be coming to an end.

China's two biggest lithium producers, Tianqi Lithium (Tianqi Lithium Corp.) and Ganfeng Lithium (Ganfeng Lithium Group Co.), closed up 6.5 per cent and 7 per cent, respectively, on Wednesday in Hong Kong. The sharp rise in oil prices suggests that investors may be preparing for a recovery in oil prices.

On Wednesday, the price of lithium carbonate futures for January delivery on the Guangzhou Futures Exchange was 92,450 yuan ($12,915) a tonne, down from more than 200,000 yuan a tonne when the exchange first launched the lithium carbonate contract in July.

Zhang Weixin, an analyst at China Futures, said lithium's downward trend was "close to the end" and could bottom out at between 80,000 and 90,000 yuan per tonne.

While lithium prices may not fall much, a sharp rebound seems unlikely. A massive expansion in supply and a slowdown in the growth rate of electric vehicle sales are among the reasons for the slump, and Benchmark Mineral Intelligence expects the global market to return to deficit only by 2028.

Spot prices for lithium carbonate, a partially processed metal, have fallen more than 80 per cent to 98,500 yuan ($13,761) a tonne from a peak in November last year.

The plunge in lithium prices has almost bottomed out, but a longer period of weakness is still possible, Wei Xiong, an adviser at raw materials trader Traxys, told a conference in Shanghai. A turning point to monitor, he said, would be "whether high-cost mines will exit".
[Source - CKN]