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Lithium stocks’ climb in China continues

EV battery maker CALB targets $1.47 billion Hong Kong IPO
A rechargeable lithium ion battery made for Volkswagen. Photo: Reuters

The lithium battery sector is rising with the growth of electric vehicles and strong demand for commodities like this that will power autos in coming years

(AF) The lithium battery sector continued to rise on Chinese markets on Friday June 4. As of press time, more than 10 stocks, such as Far East, Jiangsu Cathay Pacific, Desai Battery and Yongtai Technology hit their daily limit, while Xinwangda, Fulin Precision, Defang Nano and other stocks rose over 10%.

On June 2, CATL and Great Wall Motors announced the signing of a 10-year strategic cooperation framework agreement. In addition to Great Wall Motors, CATL has reached strategic cooperation with many well-known car companies by virtue of its strong position in the field of power batteries.

Recently, CATL has also been certified by the Volkswagen Group Battery Testing Laboratory, becoming the world’s first power battery manufacturer to obtain this certification.

Huabao Securities noted that with the expansion of production capacity of mainstream battery manufacturers, demand for midstream battery materials and order locking has become increasingly important, while downstream demand has also driven strong order demand for midstream battery material manufacturers.

Leading manufacturers with obvious advantages in cost and economies of scale in the diaphragm field are paying attention to related listed companies with low mining costs and high-quality lithium resources.

Huachuang Securities pointed out that the leading lithium battery companies on the supply side are basically at full production. On the one hand, there is strong downstream demand, and on the other, they need to prepare an inventory for the peak auto season in the second half of the year.

The continuous increase in the price of raw materials will sharply increase the operating pressure on small and medium-sized enterprises. Because of the small production and sales scale of SMEs, the overall battery cost is higher than that of large enterprises, so the continuous increase in raw material prices will make small firms face cash flow and profit pressure. Under such circumstances, the concentration of the entire battery industry will increase, and the strong position may continue.

This wave of raw material price increases will be the touchstone for power battery companies.

Kaiyuan Securities said the surge in demand for the entire lithium battery industry chain is becoming more and more certain, and prosperity will be further improved in the second half of the year. In terms of ternary cathodes, the trend of high nickel prices is becoming more and more obvious.

HuaAn Securities believes that the importance of lithium resources is prominent, and the mainstream technology route still maintains an advantageous position. It recommended paying attention to the domestic salt lake lithium extraction business.


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Chris Gill

With over 30 years reporting on China, Gill offers a daily digest of what is happening in the PRC.


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