CATL (SHE: 300750) has made headlines after confirming the suspension of production at a large lithium mine in Yichun, Jiangxi province. This news has had a significant impact on lithium producers and lithium carbonate prices, causing a surge in both.
The company took the decision to suspend operations at the Yichun project after the mining permit expired on August 9. CATL has assured investors that they are actively seeking an extension of the permit and will resume production as soon as possible once approval is obtained. Despite the temporary halt in production, CATL has stated that this issue will have minimal impact on its overall operations.
Meanwhile, reports from local media outlet Cailian suggest that CATL’s mining permit for the Jianxiawo mine has also expired. However, production at other lithium mines in Yichun is proceeding as usual. Bloomberg had previously reported that the suspension of lithium production at Jianxiawo could last for at least three months. Discussions are ongoing with government agencies regarding the renewal of the license, with the possibility of extending the suspension period further.
The news of CATL’s production halt has been received positively by China’s lithium industry, which has been facing sustained price pressure. Following the announcement, China’s most active lithium carbonate futures saw an 8 percent increase, reaching RMB 81,000 ($11,280) per ton. In response, shares of lithium producers traded in Hong Kong experienced a surge, with Tianqi Lithium (HKG: 9696) rising by nearly 11 percent and CATL seeing a 1.5 percent increase.
The current spot prices for lithium carbonate in China stand at around RMB 70,000 per ton. The rise in lithium prices can be attributed to the rapid development of China’s EV industry in 2022, which has driven demand for lithium batteries. In November 2022, the price of battery-grade lithium carbonate soared to RMB 590,000 per ton, marking a significant increase from RMB 41,000 per ton in June 2020.
As CATL navigates the process of renewing its mining permit and resuming production, the industry will be closely monitoring developments. The company’s proactive approach to addressing the issue and the positive market response reflect the resilience and dynamism of China’s lithium sector.
($1 = RMB 7.1832)
