Lithium prices in China halted a five-month slide amid signs demand growth from battery makers may finally be picking up.
Lithium carbonate in China rose 1.2 per cent on Wednesday, its first gain this year. Battery prices have fallen more than 70 per cent since mid-November as companies in the battery supply chain reduce inventories rather than repurchase them, while the end of subsidies for electric vehicles in China has dampened demand.
Current data suggest that the outlook for electric car sales has improved, while lithium inventories are shrinking.
"There has been an increase in buying by traders who believe lithium prices have bottomed, which has supported lithium this week," said Jesline Tang, a non-ferrous pricing analyst at S&P Global Commodity Insights. "There is also talk of battery manufacturers running down inventories, which could boost restocking activity."
On Wednesday, gold edged up to 167,500 yuan a ton, according to Asian Metal Inc.
That could signal a reprieve for some of China's smaller rare earth producers, whose margins have been hit by the collapse in iron ore prices. Yet even with this year's collapse, lithium carbonate is still four times more expensive than it will be in 2020.
There has also been acquisition activity in the sector, with top U.S. producer Albemarle Corp. In recent months, it has sought to buy Australian miner Liontown Resources Ltd., showing optimism about long-term prices.
Ganfeng Lithium Group Co and Tianqi Lithium Corp, China's leading lithium producers, will report their annual results on Thursday and Friday, respectively, which could give investors fresh insight into the state of the supply side.
The price of spodumene, a lithium-bearing rock mined in Australia, has fallen 16% from last year's record high, according to Benchmark Mineral Intelligence.
