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https://www.bloomberg.com/news/newsletters/2024-09-13/catl-s-suspension-of-china-lithium-mine-won-t-be-enough-to-ease-supply-glut

Stoppage at China Lithium Mine Won’t Be Enough to Ease Supply Glut

The bump in producer stocks following CATL’s halt will likely be short-lived amid a retreat on electric vehicles.
By Martin Ritchie

13 September 2024 at 7:46 pm GMT+8

The world’s biggest battery maker threw lithium miners a bone this week, but it doesn’t look like the excitement will last long.

Shares in producers surged after Contemporary Amperex Technology Co. Ltd. — better known as CATL — reportedly shut one of the world’s biggest sources of the metal. Albemarle Corp. and Pilbara Minerals Ltd. each jumped more than 13%, while China’s two biggest lithium miners reached their 10% daily limits.

The mine at Yichun in southeastern Jiangxi province accounts for about 5%-6% of global supply. That’s a meaningful chunk for any commodity market to lose and a sign that the devastating price slump underway since late 2022 is finally resulting in significant cutbacks.

But there are plenty of reasons to remain gloomy about both the supply and demand side of the lithium ledger.

The mine at Yichun produced lower-grade, cheaper ore called lepidolite. It had been thought this would make it more resistant to closure.

Similar mines remain in operation. UBS Group AG says there will be about 213,000 tons of supply from these low-grade sites in China next year, in addition to the 95,000 tons it had been expecting from CATL.

There’s also fresh production on the way from Africa, where Chinese companies have spent billions of dollars developing mines.

Downstream, there’s more bad news. Volkswagen AG, Toyota Motor Corp. and Ford Motor Co. are among the automakers reining in their electric-vehicle ambitions.

Citigroup Inc. recently noted a shift in the Chinese market toward plug-in hybrids and extended-range EVs — at the expense of pure battery-powered cars.

So perhaps it isn’t surprising that analysts reacted more soberly to the CATL news than lithium mining investors, whose gains might turn out to be as fleeting as a sugar rush.