Lithium prices and company stocks rose sharply after Chinese giant Contemporary Amperex Technology Co. Ltd. (CATL) shut down a major deposit in China, prompting rumors that Beijing may suspend other projects due to the problem of excess capacity in the economy.
This is reported by the Bloomberg agency.
Shares of Tianqi Lithium Corp. jumped 19% on the Hong Kong Stock Exchange, while Ganfeng Lithium Group Co. rose 21%. Australian mining companies also enjoyed growth after CATL confirmed the closure of a deposit in Jiangxi Province. Lithium prices in the Guangzhou futures market increased by the maximum allowable amount.
The future of the CATL deposit, which is the largest in China's lithium hub in Yichun City, has been under intense scrutiny for several weeks due to rumors that local authorities would not renew its license. This deposit accounts for about 6% of global lithium production, according to Bank of America, and other deposits in the region provide at least another 5%.
"I think this means that the lithium price has a lot of potential for growth in the near term," said Matty Zhao, co–head of Chinese equities at the bank, in an interview for Bloomberg TV.
Lithium manufacturers are facing a global oversupply, compounded by challenging demand conditions for electric vehicles, in particular due to the withdrawal of incentives for this industry in the United States under the presidency of Donald Trump.
CATL, the world's largest battery manufacturer, confirmed the closure of its Jianxiao field on Monday morning, saying it was trying to update its license without further details.
Work will be suspended for at least three months, sources familiar with the situation told Bloomberg News after the mining license expired on August 9.
The Chinese company said the shutdown would not have much impact on its overall operations, and its shares rose 2.8% on the Hong Kong Stock Exchange, although they later partially adjusted.
