Batteries run down

SHORT-SELLING of shares in lithium miners SQM, Albemarle, Galaxy and Orocobre has ballooned this year, reflecting what fund managers say is growing scepticism about an imminent battery boom.

The heavy shorting of the stocks puts investors at risk of a short squeeze if project timelines meet or beat expectations, or if near-term oversupply of battery chemicals proves to be more seasonal than structural, analysts said.

Short selling entails an investor selling shares he or she does not own, hoping to buy them back at a lower price in the future. If the shares rose instead, an investor would need to cover their position by buying back the shares for a loss.

Morgan Stanley shocked lithium bulls in February with a forecast for rising supply to swamp demand from next year, hitting prices.