In the afternoon, a large number of stocks hit the daily limit! Australia suddenly announces a major positive development! The 13 trillion dollar sector is experiencing a full-scale breakout!

Lithium batteries have shown sustainability!

On the afternoon of March 27, Ganfeng Lithium (002460) A-shares hit the daily limit, and Hong Kong stocks rose over 12% at one point, reaching HKD 76.35 per share. Haike Xinyuan, Chuaneng Power (000155), Tianyuan Co., Shida Shenghua (603026), Weiyuan Co., and Yongshan Lithium also hit the daily limit, with nearly 30 stocks in the entire sector hitting the limit at one point. According to statistics, the total market value of lithium battery concept stocks in A and B shares reached 13.6 trillion yuan.

Some analysts believe that the demand for lithium is exploding due to high oil prices, and global lithium battery orders are flooding into China. Additionally, the supply side is exceptionally weak; no one expected that super-mining country Australia might face a standstill due to diesel supply issues.

It is noteworthy that today, non-ferrous metals performed well overall, with gold and silver both recording significant gains, and lithium carbonate performing very strongly. Meanwhile, the US dollar index also experienced a sell-off.

Lithium continues to explode

Following yesterday’s surge, lithium rebounded sharply again this afternoon. Hong Kong lithium battery stocks continued to strengthen in the afternoon, with Ganfeng Lithium rising over 12%, Tianqi Lithium (002466) rising over 7%, Zhongchuang Xinhang rising over 6%, BYD (002594) shares rising nearly 5%, and CATL (300750) rising over 3%.

After Ganfeng Lithium hit the daily limit, it ignited the entire sector in A-shares. Dinglong Co. (300054) and Haike Xinyuan both hit the daily limit at 20%, Haichen Pharmaceutical (300584), Tianhua New Energy, and Huasheng Lithium all rose over 10%, while Hangzhou Electric (603618), Tibet Zhufeng (600338), Shengen Lithium, Dadongnan, and Shida Shenghua stocks hit the limit, with nearly 30 stocks in the entire sector hitting the limit or rising over 10%.

Some brokerage firms believe that the demand for lithium mines is already on the verge of explosion, while the weak supply is leaking everywhere. The demand for lithium batteries is exploding due to high oil prices, and global lithium battery orders are flooding into China. Scenarios such as energy storage, new energy passenger vehicles, and new energy heavy trucks are all clearly feeling the surge in new demand. This part represents future demand growth.

Based on the experience of the Russia-Ukraine conflict, it is expected that in two months, specifically in May, there will be a clear upward adjustment in domestic production expectations, and the scale will be specified. Meanwhile, the supply side is exceptionally weak; no one expected that super-mining country Australia might face a standstill due to diesel supply issues.

Australia has closed four refineries in the past ten years, leaving only two remaining domestically. Nearly 90% of refined oil depends on imports. Diesel is mainly imported from Singapore, South Korea, and China. However, since the outbreak of the Middle East war, Asian countries are struggling to secure their refined oil supply, let alone export it to supply Australia. At least six fuel ships (mainly including diesel) have been canceled or delayed. Australia’s oil product inventory is only about one month, the lowest level among International Energy Agency member countries, and the ongoing war will lead to a crisis in Australia’s fuel supply.

Australian iron ore producer Fenix announced that its mining operations are beginning to be affected due to limited diesel supply caused by the war in Iran, forcing the reduction of some business activities. The diesel consumption in Australia’s mining industry accounts for 30% of the domestic total, with regional diesel reserves varying, and the overall inventory lasts 15-30 days. From a value perspective, the importance of lithium mines ranks behind coal, iron ore, and gold, and is not a priority for supply guarantees. Therefore, the lithium production in Australia, which accounts for 30% of global supply, may shrink in the short term, or even face a shutdown.

The US Dollar Index is an important guide

On March 27, lithium carbonate futures also performed strongly, soaring over 6% in the afternoon. Other non-ferrous commodities also performed well. Spot gold broke through USD 4,470 per ounce, rising more than 2% during the day. Spot silver reached USD 70 per ounce, rising 3% during the day. At the same time, the US dollar index also began to weaken. Analysts believe that the US dollar index will be the most important investment guide in the future.

Currently, the situation in the Middle East is overturning Wall Street’s optimistic expectations for the dollar. The Bloomberg Dollar Index has risen more than 2% since March, expected to achieve the best monthly performance since July of last year, a shift driven by safe-haven funds flowing in and soaring oil prices weakening the market’s bets on Fed rate cuts. However, this rally has also raised questions about the long-term status of the dollar. By 2025, the Bloomberg Dollar Index is expected to drop about 8%, marking the largest decline since 2017, mainly due to market expectations that the Fed will continue to cut rates and the rising discussion of “de-dollarization.”

Deutsche Bank warns that the Middle East war is testing the dollar’s status as the settlement currency for oil trade, which may accelerate the shift to other currencies. Additionally, if high oil prices continue to drag down the global economy, market expectations for Fed rate cuts may reignite, which could lead to a weaker dollar. Both Goldman Sachs and Morgan Stanley believe that increasing economic concerns will suppress the dollar. While institutions like TD Securities and Manulife Investment Management have closed some dollar short positions, they still expect the dollar to depreciate in the medium term, with the euro likely to appreciate. Nevertheless, the dollar’s sell-off will benefit the performance of non-ferrous metals.

(Author: Wang Zhiqiang HF013)

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