The rush to lithium producing stocks was all the rage in 2017 and early 2018. This hype was generated due to the expected rise of demand for electric vehicles over the coming years and decades.
EVs are typically powered by lithium-ion batteries. Unfortunately for those jumping on the lithium rush, production has ramped up across the board and it is a sector that quickly became oversaturated.
Lithium Americas (TSX:LAC)(NYSE:LAC) is a Vancouver-based lithium producer. Shares have dropped 5.5% in 2019 as of close on October 23. The stock is down 21% over the past three months.
In September the company reduced its production target and cut its budget as the sector wrestles with a global supply glut. Its Thacker pass project is set to open by 2023, with an annual production target of 20,000 tonnes.
Nemaska Lithium (TSX:NMX) aims to become a lithium hydroxide supplier for the emerging lithium battery market. Shares have plunged 67% in 2019 so far. In mid-October the company said that its troubled Whabouchi project would require further adjustment due to delays in financing. Nemaska will let go of 64 employees and activities will slow down until the winterization of the site.
Both stocks are hovering around 52-week lows, but neither is in technically oversold territory going by their respective Relative Strength Index (RSI). The ongoing supply situation will continue to apply downward pressure on spot prices, making it difficult to justify jumping in on these stocks. I’m staying away in late 2019.
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