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Galaxy Resources Limited (ASX: GXY) is trying to gain the leverage of battery chemical demand and is moving forward from a lithium exporter to battery chemicals producer, as the company has made an investment in the Chinese processing plant.
Lithium components and the battery boom in the market is prompting the company to leap forward and take advantage of high lithium components prices in the global market. The step taken by GXY would see the spodumene concentrate to divert towards the processing plant in China from its Mount Cattlin mine for further processing into lithium carbonate or lithium hydroxide.
The estimation of the market comes into play as the company recently had an eye on the Bald Hill mine, which is a 50:50 Joint venture between Tawana Resources and Alliance Mineral Assets Limited (ASX: A40). GXY confirmed that the company undertook a strategic stake in Alliance Mineral as Mt Cattlin has a limited life.
However, Galaxyâs strategic investment in the lithium component or the battery components such as lithium carbonate and lithium hydroxide could see a hiatus on the companyâs planned gains as the growth in the battery component market is slower than initially projected by various lithium hydroxide producers.
However, the standards of lithium hydroxide in China is comparatively less than the international market, and an investment in the processing plant in China could be slightly supportive despite slower growth in the lithium hydroxide market.
The shareholders of the company seem to fathom the impact of slower growth, and the share prices of the company are on a downward journey.
The share prices of the company are on a continuous downtrend from the level of A$3.660 (Dayâs high on 4th June 2018).
The prices initially plunged to the level of A$2.080 (Dayâs low on 30th October 2018) before re-bouncing to the level of A$2.850 (Dayâs high on 8th November 2018).
The downside rally resumed from the level of A$2.850 to the level of A$1.895 (Dayâs low on 12th February 2019), from where a slight recovery was seen till the level of A$2.300 (Dayâs high on 25th February 2019).
The prices fell post making a high of A$2.300 to the level of A$1.445 (Dayâs low on 1st May 2019). Post a recovery till A$1.810 (Dayâs high on 22nd May 2019). The prices are again moving downside and are currently hovering at A$1.545 (as on 29th May close).
GXY Daily Chart (Source: Thomson Reuters)
Following the development on a daily chart, the share prices of the company have shown to be moving in a continuous downtrend from the level marked with a red downside arrow.
The 14-day Relative Strength Index signifies that the share prices of the company see a selling pressure as soon as the prices tries to reach the overbought zone.
Recently a short-term Dead Cross-over (Bearish Signal) emerged on the daily chart, which is marked with a red circle on the above-shown chart, which in turn, could provide strong resistance to the share prices of the company.
The companyâs share price is trading below the 200-days exponential moving average, and by the end of the trading session, stood at A$1.545, slipping by 0.323% from its previous close.
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