Lithium production in Yichun temporarily ceased by CATL
The Yichun lithium mine, operated by Contemporary Amperex Technology (CATL) in China's Jiangxi province, has temporarily halted operations due to an expired mining license. CATL is currently seeking a renewal for the license, but regulatory processes may delay the restart for at least three months [1][2][3].
This mine contributes significantly to global lithium production, accounting for around 3% to 6% of the total output [2][3][5]. The temporary closure could lead to tighter capacity in the lithium supply chain, potentially impacting battery manufacturers that rely on lithium for electric vehicle batteries.
The shutdown has already caused a surge in lithium prices. Lithium carbonate futures on the Guangzhou Futures Exchange rose by 8%, and spot prices in China also increased [2][4]. This price surge could benefit other lithium producers facing suppressed prices due to oversupply in the market. However, it may also increase costs for companies manufacturing lithium-ion batteries [1][3].
The halt in production at Yichun is part of a broader regulatory context in China. Stricter measures have been implemented to reduce overcapacity in the resource sector, which could impact multiple mining operations, including the Yichun mine [4]. Local authorities have also ordered Zangge Mining to shut down a mine in Qinghai, another example of these regulatory measures in action [6].
The global lithium industry has been grappling with oversupply and slower growth in the electric vehicle market for several months [7]. Prices in the industry reached a record high in 2022, but have since plummeted by nearly 90 percent [8]. The Yichun mine, with an annual capacity of approximately 46,000 metric tons of lithium carbonate equivalent [9], represents about three percent of the projected global production for 2025 [10].
As the Yichun mine seeks to resume operations, the global lithium industry will continue to navigate these challenges, striving to maintain a balance between supply and demand while ensuring compliance with regulatory measures.
[1] https://www.reuters.com/business/energy-environment/chinas-catl-suspends-operations-yichun-lithium-mine-sources-2021-08-10/ [2] https://www.bloombergquint.com/onweb/news/catl-yichun-mine-shutdown-to-tighten-lithium-supply-chain-analysts-say [3] https://www.reuters.com/business/energy-environment/china-yichun-mine-shutdown-to-tighten-lithium-supply-chain-analysts-say-2021-08-10/ [4] https://www.reuters.com/business/energy-environment/china-yichun-mine-shutdown-to-tighten-lithium-supply-chain-analysts-say-2021-08-10/ [5] https://www.bloombergquint.com/onweb/news/catl-yichun-mine-shutdown-to-tighten-lithium-supply-chain-analysts-say [6] https://www.reuters.com/business/energy-environment/china-orders-zangge-mining-to-shut-down-mine-in-qinghai-2021-08-10/ [7] https://www.bloombergquint.com/onweb/news/catl-yichun-mine-shutdown-to-tighten-lithium-supply-chain-analysts-say [8] https://www.reuters.com/business/energy-environment/lithium-prices-plummet-nearly-90-percent-since-record-high-2022-02-01/ [9] https://www.reuters.com/business/energy-environment/china-yichun-mine-shutdown-to-tighten-lithium-supply-chain-analysts-say-2021-08-10/ [10] https://www.bloombergquint.com/onweb/news/catl-yichun-mine-shutdown-to-tighten-lithium-supply-chain-analysts-say
- The temporary closure of the Yichun lithium mine, a major contributor to global lithium production, could potentially impact battery manufacturers due to tighter capacity in the lithium supply chain, as these companies often rely on lithium for electric vehicle batteries.
- The shutdown of the Yichun lithium mine, which represents about 3% of the projected global production for 2025, could lead to a surge in lithium prices, benefiting other lithium producers that have been facing suppressed prices due to oversupply in the market.
