Lithium mining stocks continue to "flameout" and lithium can travel all over the world?

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On December 20, lithium electricity stocks fell sharply across the board.

The lithium mining giants Ganfeng Lithium and Tianqi Lithium fell 8.5% and 7% respectively. Jiangte Motor fell 5.2%, and Shengxin Lithium Energy fell 4.8%. At the same time, the leading lithium battery company Ningde Times fell 6.29%, Yiwei Lithium Energy fell 5.54%, Guoxuan Hi-Tech fell about 5%, and Rongbai Technology, Enjie shares, and Divine Materials fell.

The lithium mining sector has been the hottest track in the A-share market over the past year. At one point, Ganfeng lithium industry rose 145%, Tianqi lithium industry rose 300%, and Mount Qomolangma in Tibet, known as demon stocks, soared by 222% in just three months.

On December 20, this sector plummeted across the board, breaking through the psychological defenses of many investors.

01 external disease persisted

The impact of the Fed's rate hike continues.

Last week, the hawkish attitude of the Federal Reserve led to more pessimistic expectations of a tightening of global liquidity. Many hawkish Fed officials claimed on Friday that they would raise interest rates in March or May next year, and the bitmap of the latest FOMC resolution also shows that there may be three rate increases next year. At the same time, the Fed announced that it would reduce its bond purchases by $30 billion a month, twice as fast as expected.

The hawk attitude of the Federal Reserve's monetary policy, superimposed by the "four witch days" (stock options, index options, stock futures and index futures expiration dates) that panicked the market, US stocks tumbled across the board on Friday night. The Dow Jones industrial average fell 1.48%, the s & p 500 fell 1.03%, and the NASDAQ composite index fell 0.07%.

Affected by the Fed's interest rate hike, other central banks around the world have also followed suit to hedge against the fall in exchange rates and the flow of money back to the United States.

Among them, the Bank of England took the lead in raising interest rates, raising benchmark interest rates by 15 basis points to 0.25%, while the central banks of Mexico, Chile, Costa Rica, Pakistan, Hungary and Armenia all raised interest rates before the Federal Reserve. Russia, which has always adhered to the policy of raising interest rates this year, announced on Friday that it raised interest rates for the seventh time this year.

In addition, the Turkish government's interest rate cut policy led to the continued devaluation of the Turkish lira, and the stock market plunged on Friday, triggering two circuit breakers and causing panic in global markets.

At the same time, O'Micron is rapidly wreaking havoc around the world, raising concerns about the impact on the global supply chain.

On December 17, investors asked Tianqi Lithium Industry on the investor interactive platform that the new virus O'Micron broke out, and the company's overseas branch operations were at high risk. What measures will be taken if production is stopped? Although Tianqi Lithium Industry responded that the Tillison Lithium Mine, which is controlled by its holding subsidiary TLEA, is in normal and orderly operation, it is still difficult to completely allay the concerns of the market.

In countries where there is community transmission of O'Micron, the number of infections doubles every 1.5 to 3 days, significantly faster than the Delta mutant strain, the World Health Organization said on Saturday. Moreover, Omicron has spread rapidly in countries and regions with a high proportion of people who have completed vaccination, but it is not clear whether this phenomenon is due to the fact that the strain is naturally more immune to escape, more contagious, or both.

The latest figures from the organization show that as of December 16, a total of 89 countries around the world have had cases of O'Micron.

Because of the rapid spread of O'Micron, many countries have also opened more stringent epidemic prevention measures. Many European countries, such as the Netherlands, Germany and Ireland, have begun to implement blockade measures at home. Other European countries, such as France and Germany, have also announced restrictions on travel to and from the UK because of the record number of confirmed cases in Omicron. Us President Joe Biden announced that he would release O'Micron 's epidemic prevention measures on Tuesday.

To make matters worse, on December 19, local time, Boric won the new Chilean presidential election. The president has been strongly opposed to the privatization of mineral resources in Chile and advocated the establishment of a state-run lithium company.

Because Chile is the world's second-largest supplier of lithium mines, Boric's political views on the nationalization of lithium mines are likely to have an impact on the supply of domestic lithium resources.

In addition, Boric's coming to power may accelerate the implementation of a new tax system for mining companies in Chile. Under the existing Chilean mining company tax system, mining companies pay only 27% of the corporate tax and 14% of the mining tax based on productivity and production profits. The new tax system needs to add to the existing tax system the 3 per cent tax levied on lithium production of more than 50000 tons a year.

As early as 2018, the domestic Tianqi Lithium Industry acquired a stake in SQM23.77%, the largest lithium mining company in Chile and the second largest in the world, becoming its second largest shareholder. If the new tax system is accelerated during Mr Borich's tenure, it could push up production costs and curb production in Tianqi's lithium industry.

02 high price lithium is difficult to support

A series of negative external environmental factors, such as the change in global liquidity, the rapid spread of O'Micron, and the important suppliers of lithium resources may face new policy changes, are causing more pessimistic sentiment in the market, which is negative for the lithium sector.

At the same time, the market is worried about the price of lithium, which has supported the soaring share prices of lithium mining stocks in the past. The price growth of battery-grade lithium carbonate and battery-grade lithium hydroxide in China shows signs of slowing after October, while spodumene price growth in Australia has slowed since December, according to China Galaxy Securities.

In the first three quarters of this year, the results of lithium salt companies made the market feel less than expected. Lithium giant Ganfeng Lithium Q3 achieved revenue of 2.173 billion yuan, down 3.8% from the previous month. Tianqi lithium Q3 achieved revenue of 1.522 billion yuan, a month-on-month growth rate of 5.15%. Jiangte Motor Q3 achieved revenue of 665 million yuan, a month-on-month growth rate of-19.74%, and the growth rate of home profit fell 36.99%.

For the lower-than-expected results in the third quarter, the reasons given by the relevant companies are mostly related to the rising prices of production materials such as thermal coal and soda ash, as well as the lag of long-term price increases.

In addition, affected by the double control of energy consumption, the power supply is relatively tight in the second half of the year. The production of other materials such as copper and electrolyte for new energy electric vehicle batteries has also been suppressed. With the rising tide of lack of core, the output of new energy electric vehicles is affected to a certain extent.

In addition, due to lithium going all over the world this year, lithium mining companies such as Ganfeng Lithium Industry and Tianqi Lithium Industry have begun to frantically purchase lithium ore resources and expand their production capacity, and some companies have even engaged in lithium wars. If production capacity is released next year, and the demand for new energy vehicles can not keep up with the rate of capacity release, it is easy to create a supply glut, which may have a blow to lithium prices.

03 conclusion

In fact, since the beginning of September this year, the lithium plate seems to have a pullback trend. Lithium battery ETF fluctuated horizontally after entering September, while Ganfeng lithium's high in September has fallen by 30%, Tianqi lithium by 24%, Jiangte Motor by 33% and Tibet mining by 42%.

In terms of valuations, this year has also been a year of soaring valuations for lithium miners. Lithium mining stocks have been undervalued in the secondary market since September. Now that global liquidity is tightening, the sectors that have risen a lot in the past are naturally easy to become destinations for pumping water.

It is no accident that the lithium plate plummeted on December 20. In the long run, new energy still has a long slope and thick snow, but in the short term, it is still difficult to hide the momentum of pullback.

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