By Rishav Chatterjee, Amy Lv and Lewis Jackson
(Reuters) -Chinese battery giant Contemporary Amperex Technology said on Monday it had suspended production at a major lithium mine, sparking a surge in lithium futures and miners’ share prices, amid a broader crackdown on overcapacity.
CATL said the license for its mine in Yichun, in the southern province of Jiangxi, had expired on August 9 and the company was applying to renew it “as soon as possible”.
“Once approved, we will resume production,” CATL said.
The most active lithium carbonate futures on the Guangzhou Futures Exchange surged by 8% to hit the price limit up after the announcement, while shares of listed lithium miners in China and Australia soared more than 10%.
Lithium prices have been volatile since July after China toughened its rhetoric against overcapacity, sparking hope among investors that supply side reforms could rein in output of the metal as well as other commodities like coal and steel.
Weeks after the shift in tone from Beijing, local officials ordered Chinese lithium miner Zangge Mining to stop production at a mine in Qinghai province.
CATL’s closure is the first publicly announced in Yichun, a major lithium mining hub.
The mine, one of several CATL owns, can produce just over 46,000 metric tons of lithium carbonate equivalent annually, about 3% of forecast global output for 2025, according to data from the Australian government.
Chinese lithium miners rallied at the open on the news with Ganfeng Lithium’s shares up more than 4%, while its Hong Kong-listed stock surged around 10% at the open. Tianqi Lithium jumped around 11%.
Among Australian lithium miners, Liontown Resources was the top gainer, soaring nearly 25%. Pilbara Minerals, IGO, Core Lithium and Mineral Resources jumped between 10.5% and 17.4%.
“Essentially, this news alleviates some of the oversupply pressures which have been a constraint on underlying lithium prices,” said Tim Waterer, market analyst at KCM Trade.
The lithium sector has been grappling with weaker-than-anticipated growth in demand for electric vehicles and an oversupplied market.
After soaring to record highs in 2022, prices of lithium, which is critical to the world’s transition to greener energy, have tumbled almost 90%, prompting producers around the world to scale back investment plans.
Lithium prices gained last September when CATL announced plans to adjust lithium carbonate production at its Yichun project, but prices slid when CATL said in February it would restart the operation.
The mine suspension was first reported by Bloomberg News on Sunday.
(Reporting by Rishav Chatterjee in Bengaluru and Lewis Jackson and Amy Lv in Beijing; Editing by Rashmi Aich, Subhranshu Sahu and Sonali Paul)
