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China's EV crackdown lifts lithium prices after it fell 90% since hitting record high in 2022
Lithium prices and mining shares soared on Monday (August 11) after battery maker Contemporary Amperex Technology Co. Ltd. (CATL) suspended operations at a key mine in China, raising speculation that Beijing could move to curb other projects as part of efforts to address overcapacity.
Tianqi Lithium Corp. rose as much as 19 per cent in Hong Kong trading, while Ganfeng Lithium Group Co. jumped 21 per cent. In Australia, lithium producers also rallied. Prices of the battery metal on the Guangzhou Futures Exchange climbed by the daily limit after CATL confirmed the closure of its mine in Jiangxi province.
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The mine, in Yichun, known as China's 'lithium capital', accounts for about six per cent of global output, according to Bank of America, with other mines in the area contributing another five per cent. CATL's mining licence expired on 9 August, and the company said the site would remain shut for at least three months while it seeks to renew the permit, Bloomberg reported.
Impact on CATL and wider supply chain
The company said the closure would have little effect on its battery production. CATL shares rose as much as 2.8 per cent before trimming gains. Analysts said the bigger question was whether the government would extend restrictions to other operators in the region, potentially tightening global supply.
The suspension comes amid Beijing's 'anti-involution' campaign, aimed at reining in industries suffering from overcapacity. Citi analysts said shutting down mines in Yichun could allow China to re-price lithium strategically and ensure more compliant mining practices.
Australian producers see gains
The most-active lithium carbonate futures on the Guangzhou exchange rose 8 per cent to 81,000 yuan (£8,600) a tonne for November delivery, up from 75,000 yuan on Friday.
Australian miners also saw sharp gains. PLS Ltd., formerly Pilbara Minerals, jumped 19 per cent in Sydney, Liontown Resources climbed 25 per cent, and Mineral Resources added 14 per cent.
Local authorities in Yichun have asked eight miners to submit reserves reports by the end of September after an audit found regulatory non-compliance. Analysts said further restrictions after that date could push lithium prices even higher.
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