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Lithium producers' shares up on expected electric car sales rebound in China


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Lithium producers' shares up on expected electric car sales rebound in China

Share prices for lithium producers Ganfeng Lithium Co. Ltd., Tianqi Lithium Corp., and Sociedad Quimica y Minera de Chile SA rose on their respective exchanges on investors' expectation of a rebound in sales for electric cars in China, the Financial Times reported Jan. 14.

Miao Wei, China's minister for industry and information technology, recently said that subsidies for electric vehicle purchases will not be further reduced this summer, resulting in the positive forecast from investors.

As a result, share prices for Ganfeng increased 8% in Hong Kong on Jan. 14, while Tianqi shares increased 9% in Shenzen and share prices for SQM increased about 9% in New York trading, the London-based news outlet said. Lithium is a critical component of the batteries in electric vehicles.

Sales of electric cars in China fell by 4% in 2019 to 1.2 million units after government subsidies were slashed by more than half in June.

JPMorgan analysts cited by the Financial Times are forecasting that electric vehicle sales will reach 2.3 million by 2023.

"We think a better approach to gain exposure to China's multiyear NEV or EV theme is through suppliers across various spaces including traditional auto parts, electric components, battery and equipment and material names," the bank said.

However, Joe Lowry, a lithium consultant, said 2020 will continue to be a challenging year for lithium producers until a supply glut in China would be resolved.