Lithium miners rally on Chinese electric vehicle subsidy news
China’s government has announced it will not cut subsidies for new electric vehicle purchases this July.
Lithium stocks are on the rise this week as investor sentiment improves following the Chinese government’s assurance it won’t be reducing subsidies on electric vehicles (EVs) this year.
China began subsidising EV purchases in 2009 to help stimulate the industry but has since been gradually reducing its funding.
However, the country’s Minister of Industry and Information Technology Miao Wei reportedly told senior auto industry executives at the EV100 forum in Beijing on Saturday the government will not cut subsidies for new energy vehicles (NEVs) any further in July 2020.
According to Reuters news wires, the minister also said Chinese NEV sales hit 163,000 units in December, almost double the November 2019 sales total of 83,000. This figure brings the country’s 2019 full year NEV sales to 1.2 million units.
Another catalyst for increased confidence from EV buyers appears to be the US-China trade war Phase 1 deal agreed in mid-December.
Following both announcements, Chinese EV-related stocks have rallied sharply.
Major US EV manufacturer Tesla’s stock price has also surged recently following the delivery of its Shanghai-made Model 3 cars.
Lithium price trend
Following last year’s high of about 119 index points in February, lithium had been on a downward trend until it started picking up again in September.
The market suffered heavy losses in 2019 as major miners lifted production, triggering oversupply fears amid reduced customer demand, particularly in China.
The lithium price has been steadily recovering over the past few months.
But according to market data, lithium’s current position at 114.7 index points reflects a 19.04% price increase over the last three months and is up 7.8% in the last month.
The price then shot up sharply from about 108 after the Chinese minister’s comments on the weekend.
Shares on the up
This uplifted market sentiment is reflected in the rising share price of some Australian miners, such as Pilbara Minerals (ASX: PLS), which is focused on developing its 100% owned Pilgangoora mine near Port Hedland in Western Australia into a world-class lithium and tantalum production centre.
In November, the company announced a decision to “moderate production” from the mine in response to reduced customer demand and softening market conditions.
However, the miner’s stock has risen by 33% over the last month and is up by more than 16% in the last week.
The share price of Galaxy Minerals (ASX: GXY), which is targeting a final investment decision on its Argentina-based Sal de Vida lithium brine project by mid-2020, has also grown by more than 28% over the past month and is up 29% in three months.
In addition, Orocobre (ASX: ORE), a lithium carbonate producer with operations in Argentina and a lithium hydroxide plant under construction in Japan, has experienced a 30.4% price boost in a month.