Lithium stocks weigh on ASX as global stockpiles build
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The news: Lithium stocks weighed on the ASX today after global prices for the critical mineral extended their decline this week.
The numbers: Citi analysts noted that the front-month China lithium carbonate future (GFEX) fell 5% to USD12,000 ($18,000) per tonne on Monday and is down 15% over the past month.
Rising inventories are pushing prices lower, with the latest data suggesting global stockpiles have increased by 70,000 tonnes since the start of the year.
This "high and rising low-shelf-life" chemical inventories should see lithium prices fall another 15% to 20% to USD10,000 per tonne on GFEX over the coming months, the analysts said.
In the local market, lithium majors Arcadium Lithium (-4%), Liontown Resources (-3.9%), Mineral Resources (-3.3%) and Pilbara Minerals (-1.9%) were all down at 1:15pm AEST. Materials was the ASX's second-worst performing sector, losing 1.57%.
The context: The analysts said lithium is in "freefall", with visible inventories rising at a "dramatic pace".
However, they expect the falling prices to eventually lead to mine and converter closures and industry rationalisation, alleviating the "extremely large surpluses" Citi has currently modelled.
The source: Citi research
