Büyük broker Citi, lityum piyasasını inceledi: Temellerden kopuk
Major broker Citi has reviewed the lithium market, noting the recent rally is “detached from fundamentals”
KEY POINTS
l Lithium minerals prices have enjoyed a modest rally this year after a massive plunge in 2023
l Many ASX lithium stocks have bounced, but many haven’t, leaving investors wondering what’s next for the beaten down sector
l Major broker Citi has reviewed the lithium market, noting the recent rally is “detached from fundamentals”
Recent Market Analysis
Lithium prices have shown a modest rally this year following a significant drop in 2023. The performance of ASX-listed lithium stocks has been mixed, with some recovering while others have not. This varied performance has investors questioning the next phase for the lithium market, which has seen a noteworthy downturn.
Citi's Stance on Lithium
A recent review by major brokerage firm Citi highlights concerns about the lithium market's rally, stating that it is "detached from fundamentals." Citi recommends a potentially contrarian position - suggesting investors and producers should short the August 2024 lithium hydroxide futures contract traded on the CME.
Price Predictions and Analysis
- Current to Near-Term: Citi believes that lithium prices could fall substantially by around 40%, from US$16,700 per ton to US$10,000 per ton.
- Mid to Long-Term: Citi's outlook is less bearish, with expectations of prices increasing to US$14,000 per ton by the end of the year and possibly reaching US$18,000 per ton by the end of 2025.
Key Reasons for the Short Position
1. Overdone Contango: The lithium futures contracts are trading at a significant premium over the spot price, which Citi suggests is overly inflated and presents an opportunity for traders.
2. Demand and Supply Dynamics: Citi points to a softer demand outlook, particularly outside of China, and an unrelenting supply, which combined, signal a downside for lithium mineral prices.
Specific Details Influencing the Market
- Demand Side: The demand in EV markets, specifically outside of China, is softening, causing delays in lithium mineral purchases and a preference for internal combustion engine vehicles over EVs to maintain profitability.
- Additionally, in China, there's a trend towards selling more hybrid models, which leads to lower lithium consumption.
- Supply Side: The recent price increases might delay necessary market rebalancing. High inventories and the continuation of robust production from ex-China miners contribute to an oversupplied market.
Figure 2. European EV sales are 18% y/y higher for 2M’24, but BEV growth faces headwinds. Source: Citi Research, ACEA, Bloomberg
Upside Risks to Short Position
Citi acknowledges risks to their recommendation, which include:
- A stronger EV sales outlook than anticipated.
- Supply not meeting expectations.
- A continuous battery restocking cycle.
- An improved economic outlook leading to lower interest rates.
Conclusion
Citi's report suggests a cautious or bearish stance on lithium, advising a short position based on their analysis. However, it's important to note the risk factors that could invalidate this position. Investors in the lithium market should closely monitor the demand and supply trends, particularly in the EV sector, as well as any changes in macroeconomic conditions that may impact lithium prices.
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