Monsters of Rock: Strange sight as lithium monsters pull miners into the red

Lithium stocks face major sell off as ASX materials sector drops
Rare earths miner Lynas also down after broker note
Nickel Industries announces first NPI production from Oracle Nickel Project in Indonesia

Lithium and battery metals companies have switched roles with gold miners, pulling the ASX Materials sector into the red as 2022’s hot commodity faltered.

Allkem (ASX:AKE) closed the day down 12.36%, with Pilbara Minerals (ASX:PLS) off 8.7%, IGO (ASX:IGO) knocked back 7.36% and Mineral Resources (ASX:MIN) falling 4.84%.

Among the mid-caps Core Lithium (ASX:CXO), the subject of a bearish Macquarie note, cratered 15.82%, Sayona (ASX:SYA) fell 9.62%, Lake Resources (ASX:LKE) tumbled 7.66% and Liontown Resources (ASX:LTR) slid 6.82%.

It’s a strange sight to see indeed, given prices for lithium chemicals in Asia climbed to new heights over the weekend, challenging the 600,000 Yuan (US$85,000) level on some price agencies’ assessments.

The fall seemed to be triggered by a couple of things, with US EV and lithium stocks falling overnight amid cost and supply chain concerns, and multiple analysts reporting that Wuxi lithium carbonate futures in China were down 7% on concerns CATL, the world’s largest battery maker, would wind back production in November.

JP Morgan analysts characterised expectations of a cutback, not officially announced, as a return to seasonality seen in recent years.

Battery production often falls late in the year ahead of weaker vehicle sales in January and February in the Lunar New Year season.

Could it be the top? It’s a question that’s been asked for months.

Elsewhere, Lynas Rare Earths (ASX:LYC) fell 8.2%, with Macquarie taking a scythe to its NdPr forecasts and downgrading the largest producer of rare earths outside China, saying Lynas’ FY23 and 24 earnings will be 27% and 11% lower at forecast prices.

Battery metals share prices today:

Lighthouses in the storm

There were a handful, with a smattering of gold and coal stocks in the green.

With LME nickel prices surging overnight, Indonickel producer Nickel Industries (ASX:NIC) was one stock which bucked the trend, up 1.9%.

NIC also announced that it had produced the first nickel pig iron from its Oracle Nickel Project ahead of schedule and made its first nickel matte sales from the Hengjaya Nickel Project, giving the Justin Werner led miner and processor access to both class 2 and class 1 nickel markets.

By the middle of next year the company expects to have a nameplate production capacity of 78,000tpa of nickel metals and actual production levels in excess of 100,000tpa, outstripping legacy majors like Sumitomo, Eramet, BHP (ASX:BHP) and Anglo American.

Meanwhile, rare earths developer Arafura Rare Earths (ASX:ARU) moved a step closer to an FID on its Nolans project in the Northern Territory.

Backed by offtake deals with Hyundai and Kia, the company announced today it had received a mining authorisation from the NT Government, the final environmental approval required to pave the way for an FID and start of construction early next year.