Lithium stocks rally as CATL mine halt raises prospects of tighter supply
Shares of lithium producers surged on Monday after Chinese battery giant Contemporary Amperex Technology (CATL) halting output at a major mine raised hopes it would erode the oversupply in a market grappling with soft demand.
During morning trade, Albemarle Corp jumped 10.2 per cent, while Chile's Sociedad Quimica y Minera rose 9.2 per cent and Lithium Americas gained 2.4 per cent.
Smaller companies, Standard Lithium, Piedmont Lithium and Sigma Lithium advanced between 6.2 per cent and 19.6 per cent. Chinese and Australian miners also rallied.
The lithium sector has been struggling with a glut following weaker-than-anticipated growth in demand for electric vehicles.
The most active lithium carbonate futures in Guangzhou rose the eight per cent daily limit after CATL said its mining license for the Yichun project in Jiangxi province expired on Aug. 9 and renewal was underway.
The site can produce more than 46,000 metric tons of lithium carbonate equivalent a year, roughly three per cent of the global supply forecast for 2025, according to data from the Australian government.
Morgan Stanley analysts said the outage could erode the small 60,000-tonne surplus it expects for 2025, bringing 'upside risk to lithium prices in the short term' and potentially moving the market closer to balance if other disruptions follow.
Longer-term, they expect a surplus to re-emerge without further supply discipline.
Morningstar analyst Vincent Sun said the suspension was 'an indication that the industry is taking proactive steps to contain further lithium price falls observed year-to-date.'
With lithium prices now below the marginal cost of production, the move could be perceived as a positive driver to limit supply growth and rebalance the market, he said, but added it was 'still too early to confirm a price recovery trend for the rest of the year.'
(Reporting by Arunima Kumar in Bengaluru; Editing by Leroy Leo)
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