Lithium market erupts as CATL shuts one of world's biggest mines

Business Times

14 hours ago

[SINGAPORE] Lithium prices and stocks spiked on Monday (Aug 11) after battery giant Contemporary Amperex Technology Co Limited (CATL) halted operations at a major mine in China, spurring speculation that Beijing might move to suspend other projects as it tackles overcapacity across the economy.
Tianqi Lithium jumped as much as 19 per cent in Hong Kong, while Ganfeng Lithium Group surged 21 per cent, and Australian miners rallied, after CATL confirmed it had shut the mine in Jiangxi province. Prices of the battery metal on the Guangzhou Futures Exchange surged by the daily limit.
The fate of the CATL mine, the biggest in China's lithium hub of Yichun, had been under close scrutiny for weeks, amid speculation that authorities would not extend its license. The mine accounts for some 6 per cent of global output, according to Bank of America, while other mines in the region account for at least another 5 per cent.
'I think it will mean the lithium price in the near term has very big upside,' Matty Zhao, co-head of China equity research at the lender, said.
Lithium producers have struggled with a global supply glut exacerbated by demand headwinds for electric vehicles, including US President Donald Trump's rollback of incentives for the industry in the US. In China, the so-called anti-involution campaign has fuelled speculation about a possible crackdown on a sector that's clearly suffering from oversupply.
CATL, the world's biggest battery producer, confirmed the closure of its Jianxiawo mine on Monday morning, saying it's seeking to renew its expired permit without giving more details. The operation will be shut for at least three months, sources familiar with the matter told Bloomberg News at the weekend, after its mining license expired on Aug 9.
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The Chinese company said that the stoppage would have little impact on its overall operations, and its shares rose as much as 2.8 per cent in Hong Kong before paring about half of the gains.
'For CATL, we do not expect any meaningful operational impact to battery production from the Jiangxi mine suspension,' said Eugene Hsiao, the head of China equity strategy at Macquarie Capital. 'The concern from the mine suspension is less on CATL and more on if the broader lithium supply chain can see tighter capacity, and if this will be coordinated via Chinese government actions.'
The 'anti-involution' theme has gripped China's financial markets in recent months, with investors trying to pinpoint industries and companies that might benefit from Beijing-led efforts to tackle deflation and overcapacity. It's encompassed sectors from e-commerce to EVs and steelmaking.
'We believe this could be part of the government's anti-involution initiative,' Citigroup analysts said in a note. Closures in Yichun 'should help China to re-price its strategic resource in the long run, and the government can ensure lithium is mined and extracted in a proper and compliant way.'
Like many Chinese battery companies, CATL has aggressively expanded investments in minerals from lithium to nickel and cobalt in order to lock in long-term supplies and lower costs. That vertical integration has, in turn, aided China's push to become the world's leading EV manufacturer.
The most-active lithium carbonate futures contract on the Guangzhou Futures Exchange jumped by the daily limit of 8 per cent at the open on Monday, according to traders who have access to live pricing. They asked not to be named as they aren't authorised to speak publicly. The contract due in November traded at 81,000 yuan a tonne, up from a settlement of 75,000 yuan on Friday, they said.
Australian miners
Shares of Australian lithium producers also spiked. PLS, formerly Pilbara Minerals, jumped as much as 19 per cent in Sydney, while Liontown Resources surged as much as 25 per cent. Mineral Resources was up as much as 14 per cent.
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.
'CATL's situation does not change the oversupply structure in the market,' said Zhang Weixin, an analyst at China Futures. 'However, if production disruption is expanded to other mines in Yichun after Sep 30, the lithium price level could go even higher.' BLOOMBERG