Miners rank among most shorted stocks on Asia-Pacific exchanges in early March

Lithium, graphite and ferronickel producers were among the most shorted stocks on Asia-Pacific exchanges in early March, according to an S&P Global Market Intelligence analysis.

Syrah Resources Ltd., the largest graphite producer outside China, topped the list of most shorted equities in Australia with 18.8% of shares borrowed on loan as of March 8. The miner reported 39% lower sales year over year in the fourth quarter of 2023 as China's graphite export restrictions curb the country's import demand for natural graphite.

Lithium miner Liontown Resources Ltd. was the second most shorted Australian stock in the analysis at 13.4%. Core Lithium Ltd. ranked eighth among shares borrowed at 10.2%.

The analysis compared the percentage of outstanding shares on loan on exchanges in Australia, Hong Kong and Japan as of March 8.

Investors with short interest in a company expect the shares to decline. The bets against the miners come after company stocks have already taken a hit from a plunge in metal prices, driven by oversupply, demand questions and China's weak property sector.

Betting on lower metal prices

Ganfeng Lithium Group Co. Ltd., China's leading lithium salts producer, was third on Hong Kong's list of most shorted stocks at 13.8%.

Japan's top 10 companies by highest share borrowing included ferronickel producer Pacific Metals Co. Ltd. at 22.5% and Osaka Titanium Technologies Co. Ltd. at 20.3%.

When executives from Australian pure-play lithium miner Pilbara Minerals Ltd. were pressed about high levels of short interest in mid-January, CEO Dale Henderson said those investors were "betting on price movement downwards."

"As it relates to lithium, we're not alone in terms of being shorted, and certainly in the US market, the other big lithium groups are shorted to something similar to us," Henderson said during a Jan. 23 earnings call. "But of course, we stand out a bit in the ASX."

Henderson signaled that lithium investors with short positions can be caught off guard by "government stimulus and other things [that tend] to pop up because what we know from this industry is pricing and demand can change very quickly."

Pilbara's stock price closed at A$3.27 on Jan. 23 but has since climbed to A$4.17 as of March 12, jumping 4% in a single day on the March 12 announcement of an offtake agreement for spodumene concentrate with Tesla supplier Sichuan Yahua Industrial Group Co. Ltd. The miner agreed to supply 20,000 to 80,000 metric tons in 2024 and 100,000 to 160,000 metric tons in both 2025 and 2026 from its Pilgangoora mine.