Australian fund managers are increasingly taking on hedge funds betting against lithium stocks, positioning for a rebound in prices that could force short sellers to cover and intensify the sector rally, according to a report by the Financial Review.
Perth-based Argonaut’s David Franklyn increased his exposure to lithium in June, despite spodumene – the lithium variety mined in Australia – falling to a four-year low of $575 a tonne, leaving producers among the most shorted ASX stocks. Franklyn targeted ASX-listed Patriot Battery Metals and Toronto’s Q2 Metals, anticipating tightening supply amid strong EV-driven demand.
His strategy was vindicated after Chinese battery giant CATL suspended operations at a major mine, sending spodumene prices up 11% on Monday and 6.6% on Tuesday to $975 a tonne, roughly 70% above the June lows, according to S&P Global Platts.
Argonaut has added Liontown Resources to its Natural Resources Fund and participated in the company’s $266m capital raise. PLS, Liontown Resources, and Mineral Resources remain among the ASX’s most shorted stocks.
TenCap’s Jun Bei Liu also profited from the sector’s volatility. Initially shorting PLS, Liu switched to a long position after reports of Chinese mine closures.
Supply disruptions intensified as Albemarle reported an incident at its Chilean lithium plant, under investigation. Lithium carbonate futures on the Guangzhou Futures Exchange climbed 2.5% on Tuesday, following an 8% daily-limit jump on Monday. UBS has upgraded spodumene price forecasts for next year and 2027 by 27%, citing supply disruption risk as Chinese licence scrutiny continues.
Not all managers share the same enthusiasm tough, with Perennial’s Sam Berridge – while holding Toronto-listed Q2 Metals – planning to reduce exposure, describing the rally as “more of a blip than an inflection point.”
