Shares of North American lithium producers soared as investors bet that the suspension of a major Chinese mine would ease a supply glut and likely lead to a rebound in prices.
CATL, the world’s biggest battery producer, confirmed the closure of its Jianxiawo mine on Monday, saying it’s seeking to renew its expired permit. The fate of the mine, the largest 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 about 6% of global output, according to Bank of America Corp.
“In the short term, abrupt supply cuts would trigger further price volatility, disrupt the domestic battery industry and benefit foreign lithium miners,” said Martin Jackson, head of battery raw materials at consultancy CRU Group.
Shares of US producer Albemarle rose nearly 16% Monday in New York in its biggest intraday increase in four months. Piedmont Lithium Inc. rose as much as 18%, while Lithium Americas Corp. surged as much as 14%. Chilean producer SQM also jumped as much as 12% in US trading.
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. The suspension of Jianxiawo mine could help narrow the massive supply surplus in the lithium market, potentially bolstering slumping prices of the battery metal.
The suspension of CATL’s mine will support higher lithium prices in the near term and is bullish for producers such as Albemarle Corp. and SQM, Bloomberg Intelligence analyst Sean Gilmartin wrote in a note Monday.
Reduced Chinese output has led to more upside for lithium prices, signaling the market has found a bottom, with more constructive fundamentals likely to emerge in the next two years as supply ramp-ups start to fade, Gilmartin added. Demand still is expected to grow by 15% over the period, he said.
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