Lithium stocks are taking it on the chin Monday. A U.S. semiconductor maker, a Japanese battery maker, and a Chinese miner are why. Bottom line: A supply storm is merging with brewing demand problems.
Shares of lithium miners
Albemarle
(ticker: ALB),
SQM
(SQM), and
Livent
(LTHM) were down 4.4%, 3%, and 2.6%, respectively, in midday trading Monday. Investors can’t blame the market. The
S&P 500
and
Dow Jones Industrial Average
were up 0.6% and 1%, respectively.
The problems start with
ON Semiconductor
(ON), a U.S. supplier of chips for car makers. An EV contains about 14 times more ON-type chip content compared with a traditional vehicle, according to the company. Monday, ON said fourth-quarter sales would amount to about $2 billion. Wall Street was looking for $2.2 billion. Shares were down 18.% in midday trading.
Second, Japanese battery maker
Panasonic
(6752.Japan) revised its fiscal year 2024 forecast on Monday. The company now expects sales of 8.4 trillion Yen, or about $56 billion, down from a prior forecast of about $57 billion.
The sales forecast in the company’s energy division, which includes batteries and other products, was cut by about 15% to about $5.9 billion.
Panasonic
blamed weakening demand for “high-end EVs” and weak consumer and industrial demand. High-end EVs typically have more expensive batteries. Auto makers, including
Tesla,
have been shifting to lower-priced batteries to save costs which is compounding Panasonic’s problem.
Panasonic’s fiscal year ends in March 2024. Panasonic shares dropped 2% in overseas trading Monday.
And third, Citi analyst Jack Shang downgraded shares of Chinese lithium miner
Tianqi Lithium
(9696.Hong Kong) to Sell from Buy on Sunday.
Lithium
ore “price trends weaker amid oversupply in upcoming years,” wrote the analyst. He cut his earnings estimates for 2023, 2024, and 2025.
Shares actually closed up 1.3% in overseas trading, but shares are still off about 31% over the past year.
It all adds up to weakening EV demand, which is bad for a host of stocks, including lithium miners.
Tesla
(TSLA) stock is down 4.6% at $197.75 in midday trading.
Rivian Automotive
(RIVN) shares are down 2% at $15.68 apiece.
EV sales are still growing. So far this year, EV sales are up about 50% in the U.S., about 50% in Europe, and about 20% in China. Still, when supply rises faster than demand, that’s a problem for everyone.
With the drop, Albemarle and
Livent
shares were both down 54% over the past 12 months. Prices for the benchmark lithium price have fallen about 70% over the past year. Supply growth and high industry inventories led to price declines before cracks started showing in EV demand.
Write to Al Root at [email protected]
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