Chinese lithium prices and shares of Australian-listed producers of the metal jumped after Contemporary Amperex Technology Co suspended activity at a major mine, spurring hopes of wider output curbs as Beijing cracks down on overcapacity across the economy.
The lithium industry has been struggling with a global supply glut and slower-than-expected electric-vehicle demand growth. Prices hit a record high in 2022 but have collapsed nearly 90% since then, forcing companies worldwide to rein in spending and delay expansions.
CATL has suspended production at its Jianxiawo mine in China’s Jiangxi province for at least three months, people familiar with the matter said at the weekend, after its mining license expired on Aug 9.
The EV battery giant confirmed on Monday that it had halted operations, but didn’t give any timeline for the restart. It said it was applying to renew its mining license, after which production would resume “as soon as possible,” and the stoppage would have little impact on CATL’s overall operations.
The most-active lithium carbonate futures contract on the Guangzhou Futures Exchange jumped by the daily limit of 8% at the open on Monday, according to traders who have access to live pricing. They asked not to be named as they aren’t authorized to speak publicly. The contract due in November traded at 81,000 yuan a ton, up from a settlement of 75,000 yuan on Friday, they said.
Shares in PLS, formerly Pilbara Minerals, jumped as much as 19% in Sydney, while Liontown Resources surged as much as 25%. Mineral Resources was up as much as 14%.
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Traders and industry executives are now watching for other mining curbs around China’s Yichun city, which has emerged as a battery-metals hub. A local government department has asked eight miners to submit reserves reports by the end of September, according to notes from brokers and analysts, following an audit that found non-compliance in the registration and approvals process.
“Prices may deviate from reasonable levels in the short term, but CATL’s situation does not change the oversupply structure in the market,” said Zhang Weixin, an analyst at China Futures Co. “However, if production disruption is expanded to other mines in Yichun after Sept 30, the lithium price level could go even higher.”
Citigroup Inc analysts said in a note that they also did not expect the suspension of production at the mine to result in a firm deficit, but said it would “bolster sentiment in the short term.”
