The Galaxy Resources Ltd (ASX: GXY) share price is down 5.3% to $1.69 today, despite the lithium miner with tenements in Australia, Canada and Argentina releasing no specific news to the market.
These kind of price swings over single sessions are actually not that unusual for lithium miners like Galaxy, Kidman Resources Ltd (ASX: KDR) and Orocobre Ltd (ASX: ORE).
One reason for this is that lithium prices are not exchange traded unlike other common metals or minerals such as gold, silver, coal, or oil.
The exchanges actually offer future prices for the commodities on a synthetic basis (i.e. cash settled futures) in part so a mining company knows what price it can expect to receive for its commodity in 12 months' time or more if it decides to invest in building a mine today.
Lithium however is a relatively new market due to the recent rise of lithium-ion battery powered electric cars, with prices received per tonne still directly negotiated between a supplier and buyer that requires the product for manufacturing purposes.
Therefore spot lithium prices can swing wildly and are opaque in that the price details of contracts for exchange are not always reported.
Generally the main driver of prices is the supply and demand balance, but again this is unpredictable to make this a tough space to invest in with any confidence.
Another speculative reason for the sell off today could be related to the plunging value of Tesla shares on rumours demand is falling sharply for its electric cars, as the debt-laden company also moves to cut prices for its most expensive Model X.
