Lithium Market Soars as CATL Shuts One of World’s Top Mines

(Bloomberg) — Lithium prices and stocks spiked on Monday after battery giant Contemporary Amperex Technology Co. Ltd. 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.

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Tianqi Lithium Corp. jumped as much as 19% in Hong Kong, while Ganfeng Lithium Group Co. surged 21% after CATL confirmed it had shut the mine in Jiangxi province. Australian and American miners also rallied. Prices of the battery metal on the Guangzhou Futures Exchange hit the daily limit and held firm throughout the day.

Shares of US producer Albemarle Corp. surged above 15% at 9:33 a.m. in New York, while Piedmont Lithium Inc. jumped by nearly 18%. Lithium Americas Corp. climbed as much as 13% while Chilean producer SQM rose as much as 12% in US trading.

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 wouldn’t extend its license. The mine accounts for some 6% of global output, according to Bank of America Corp., while other mines in the region account for at least another 5%.

“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 in a Bloomberg TV interview.

The most-active lithium carbonate futures contract on Guangzhou’s exchange jumped by the daily limit of 8% on Monday, according to the exchange website. The contract due in November traded at 81,000 yuan a ton, up from Friday’s settlement of 75,000 yuan.

Lithium producers have struggled with a global supply glut exacerbated by demand headwinds for electric vehicles, including President Donald Trump’s rollback of incentives for the industry in the US. In China, the so-called anti-involution campaign has fueled 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, people familiar with the matter told Bloomberg News at the weekend, after its mining license expired on Aug. 9.

The Chinese company said the stoppage would have little impact on its overall operations, and its shares rose as much as 2.8% in Hong Kong.

“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 Inc. 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.

Spot lithium carbonate prices in China rose by 3% Monday to reach 75,500 yuan a ton, the highest since February, according to Asian Metal Inc. The lithium carbonate prices traded on Liyang Zhonglianjin E-Commerce platform, a popular benchmark for domestic investors, rose by over 10,000 yuan to around 85,500 yuan per ton for November delivery.

Australian Miners

Shares of Australian lithium producers also spiked. PLS Ltd., formerly Pilbara Minerals Ltd., jumped as much as 20% in Sydney, while Liontown Resources Ltd. surged as much as 25%. Mineral Resources Ltd. was up as much as 14%.

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 Co. “However, if production disruption is expanded to other mines in Yichun after Sept. 30, the lithium price level could go even higher.”

–With assistance from Paul-Alain Hunt, Chunying Zhang, Charlotte Yang and Doug Alexander.

(Adds US shares in third paragraph. An earlier version was corrected to removed a photo and caption with incorrect spelling of mine name)