The great "rebalancing" in EV lithium has begun
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Illustration: Aïda Amer/Axios
A global glut of lithium prompted a Chinese battery company to suspend production at a massive mine, triggering a rise in commodity prices and a jump in stock prices of lithium companies.
Why it matters: Lithium is an essential raw material in electric vehicles, so any increase in prices could translate into higher costs for EV makers.
Driving the news: Chinese battery giant Contemporary Amperex Technology Co. Ltd., known as CATL, halted output at a property in the Jiangxi province, prompting global speculation about whether the country is teeing up a crackdown on overcapacity.
- "The fate of the CATL mine — the biggest in China's lithium hub of Yichun — had been under close scrutiny for weeks, amid speculation that authorities wouldn't extend its license," Bloomberg reported.
- The mine makes up about 6% of global lithium mining, according to Bank of America figures cited by Bloomberg.
The impact: Spot lithium carbonate prices in China rose about 3% Monday, FT reported.
- Corporate lithium stocks also jumped around the world: U.S. chemicals company Albemarle closed up 7.0%, while American lithium miner Piedmont gained 14.1% and Lithium Americas rose 9.3%.
What they're saying: "This is a rebalancing of the disequilibrium that exists within the global lithium market," Gracelin Baskaran, director of the Critical Minerals Security Program at the Center for Strategic & International studies, tells Axios in an email.
Context: Lithium prices have tanked over the last several years amid a global slowdown in EV sales growth.
- In Australia — the world's top producer — miners had already "curtailed production or delayed expansions" amid the drop in prices, a trend seen throughout 2024, Reuters reported in June.
- The market is "significantly oversupplied," according to a recent report by BNP Paribas senior commodities desk strategist David Wilson.
Zoom in: The average global weighted price of lithium carbonate has plunged from an all-time high of $70,957 per tonne in January 2023 to $9,553 in the first week of August, according to Benchmark Minerals data.
- "These prices are even untenable for Chinese producers," Baskaran says. "By reducing the global surplus, we expect prices to go up and allow Western producers to operate more cost competitively."
Yes, but: It might be a temporary lull in demand.
- Benchmark Minerals is projecting a 204% increase in demand over the next decade.
What we're watching: Whether this is part of a broader move by Chinese authorities to crack down on the broader EV sector amid a feverish price war.
- The Chinese Cabinet recently issued a statement saying it'll take steps to address the "phenomenon of irrational competition" in the sector, state media reported.
