Lithium spot costs have tumbled virtually 90% since late 2022, forcing mine closures and mission delays worldwide, however CATL’s shutdown within the southeastern Jiangxi province is likely one of the most notable to this point.
The mission is essential not only for its dimension, however as a result of it’s owned by a battery producer, and was considered a much less seemingly candidate for closure. It additionally produces lithium from lepidolite — a low-grade ore that emerged as a serious supply of the metallic in recent times, fueling the glut.
“There’s a stronger signaling impact from CATL’s reduce,” stated Alice Yu, lead metals & mining analysis analyst at S&P International Commodity Insights. “Because the world’s largest battery producer, its mine-side suspension reinforces the expectation of a chronic weak point in downstream demand.”
Battery metals — together with lithium, cobalt and nickel — have had a torrid time as a flood of recent manufacturing overwhelmed demand. Whereas lithium remains to be prone to be wanted in a lot better portions over the approaching many years, a rush of mining and a slowdown within the tempo of electric-vehicle adoption has battered costs within the brief time period.
The shutdown of the mine was revealed in a word from UBS Group AG that cited channel checks with contacts, which stated that CATL suspended the operation. The battery producer responded by saying its plans to regulate its lithium carbonate manufacturing on the mine in Yichun.
The transfer “is optimistic however we might want to see extra provide come out to unravel our 2025 surplus,” UBS analysts together with Sky Han stated in a word. “Key might be how the broader China lepidolite provide story evolves.”
Citi, Daiwa Capital
Lithium costs may bounce by as a lot as 25% within the subsequent three months as a result of suspension of the mine, Citi stated in a word. However the financial institution cautioned these beneficial properties may fade as “larger costs are prone to incentivize a provide response shortly,” delaying a rebalancing of the market.
Different analysts have been extra cautious on the seemingly impression.
Estimates of on how a lot lithium output might be affected “could also be a bit aggressive,” Daiwa Capital Markets analysts Leo Ho and Dennis Ip stated in a word. “It’s laborious for us to imagine that CATL has been working at such a excessive output earlier than the curtailment.”
Lithium futures on the Guangzhou Futures Trade surged practically 9% on Wednesday on the CATL information. Australian miners have been among the many largest movers. Pilbara Minerals Ltd. shot up 21% over Wednesday and Thursday. Nevertheless, Chinese language producer Ganfeng Lithium Group Co. was decrease on Thursday after leaping within the earlier session.
The Chinese language lithium market is heading into what must be a busier season for demand from EVs and electronics, and a few analysts have been already anticipating a bounce in costs anyway. However the slowdown in EV gross sales progress could proceed to be a headwind.
“Costs may see a brief respite from a fruits of mine-side cuts, and a seasonal demand spike,” S&P International’s Yu stated. “Nevertheless a sustained market surplus by means of to 2027 will weigh on the lithium worth upside.”
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