Lithium stocks slump as idled CATL mine set for early restart

Lithium producers slumped on news that a Chinese mine idled last month may restart sooner than expected, threatening fresh pressure on prices for the battery material.

Shares of Pilbara Minerals Ltd. fell as much as 17% in early trading in Sydney on Wednesday, while Liontown Resources Ltd., IGO Ltd., and Mineral Resources Ltd. all dropped by more than 10%. Earlier in New York, SQM and Albemarle Corp. fell 8.8% and 11%, respectively.

Executives at Contemporary Amperex Technology Co. Ltd. told employees in a meeting on Tuesday to prepare for a resumption at the Jianxiawo site and recall front-line workers, according to a person with direct knowledge of the matter, who asked not to be identified discussing private information. Battery giant CATL didn’t immediately respond to a request for comment.

The Jianxiawo mine in Yichun, a key Chinese lithium hub, has become a focal point for market sentiment. Its production halt due to an expired license stoked speculation that it was part of Beijing’s tougher stance on overcapacity and reflected a shift toward supply discipline. Days before Jianxiawo’s permit expired on August 9, traders flew drones over the site in the hope of gauging the state of operation.

Also Read: India to undertake Lithium exploration in Argentina, explore tie-ups in Australia for refining

“This signals the Chinese government is not keen to disrupt the value chain,” said Cameron Hughes, a battery markets analyst at industry consultancy CRU Group, adding the earlier return may trigger a decline for lithium prices. “The ease of the renewal process is a very positive sign that we will not see similar disruptions for other lepidolite producers.”

Prices of lithium carbonate — a refined form of the material used in batteries — have seen heightened volatility over supply uncertainties. On Tuesday, news of CATL’s plans to resume output sent shares of major lithium producers tumbling.

“An earlier-than-expected restart of Jianxiawo can disrupt the theme of market rebalancing in the short term,” Jefferies analysts, including Shuhang Jiang, wrote in a note to clients. “We would not be surprised if China lithium stocks react negatively.”

Catch the latest stock market updates with CNBCTV18.com's blog