Lithium producers rally on optimism over China electric vehicles

Lithium producers rallied on Tuesday as investors bet on a rebound in electric car sales in China after government assurances its subsidies for buyers won’t be cut any further.

Shares in Chinese lithium producer Ganfeng, which supplies Tesla, rose by 8 per cent in Hong Kong on Tuesday, while Tianqi Lithium added 9 per cent in Shenzhen.

Shares in Chilean lithium producer SQM also rose by 9 per cent in New York on Monday. Shares in the company are now up 15 per cent year-to-date.

The gains indicate investors are turning more optimistic on lithium producers after a difficult 2019, which saw lithium carbonate prices fall by over 30 per cent due to rapid growth in supply and a cut in electric vehicle subsidies in China.

Sales of “new energy” cars in China, which includes electric cars and hybrids, fell by 4 per cent last year to 1.2m cars after Beijing slashed government subsidies last June by more than half.

But on Saturday Miao Wei, China’s minister for industry and information technology, said subsidies for electric car purchases wouldn’t be cut further this summer.

The comments have fuelled expectations of a rebound in electric car sales this year. Sales are also likely to be boosted by the opening of Tesla’s factory outside Shanghai this month.

Lithium, which is mostly produced in Australia, Chile and Argentina, is a critical ingredient in lithium-ion batteries for electric cars.

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