Why are ASX 200 lithium shares kicking goals today?

A man sees some good news on his phone and gives a little cheer.

A man sees some good news on his phone and gives a little cheer.It has been a mixed day for the ASX 200 index on Tuesday. In afternoon trade, the benchmark index is trading largely flat.

Pleasingly, that hasn’t stopped a number of lithium shares from pushing higher today.

ASX 200 lithium shares rise

Among the best performer in the battery materials sector are the following:

  • The Allkem Ltd (ASX: AKE) share price is up almost 4% to $13.46
  • The Liontown Resources Limited (ASX: LTR) share price is up 3.5% to $1.34
  • The Mineral Resources Limited (ASX: MIN) share price is up 3% to $61.59
  • The Pilbara Minerals Ltd (ASX: PLS) share price is up 3% to $2.89

What is driving lithium shares higher?

The gains being made by ASX 200 lithium shares today appear to have been driven by concerns that supply won’t be able to keep up with demand and news of a lithium bidding frenzy in China.

In respect to the former, with demand being tipped to outstrip supply for some time to come due to electric vehicle adoption, prices of lithium could remain higher for longer. This bodes well for companies already producing lithium such as Allkem and Pilbara Minerals.

As for the latter, according to Bloomberg, an auction for a controlling stake in a Chinese lithium mine received a whopping 3,448 bids over the weekend. Bloomberg notes that this underscores “the scramble to secure the battery metal that’s key to the clean-energy transition.”

Bidders were hoping to secure a 54.3% stake in Yajiang Snowway Mining Development, which owns the Sichuan based lithium mine. The lucky bidder ultimately paid approximately 2 billion yuan (US$299 million) for the stake, which was almost 600 times greater than the starting price.

Daiwa Capital Markets’ analysts Dennis Ip and Leo Ho said in a note: “We believe the auction price indicates a bullish Chinese primary market for future lithium prices as well as the strategic importance of Sichuan spodumene assets.”

The post Why are ASX 200 lithium shares kicking goals today? appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro has positions in Allkem Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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