Lithium Prices Surge for Five Consecutive Days! Giants Like CATL Face Production Halts, Lithium Carbonate Faces Value Reassessment?

Behind the successive production halts of two industry giants, CATL in China and Albemarle in the US, the apparent reasons are the expiration of mining licenses and production safety issues. However, these events actually conceal deeper industry transformations.

Image/Ningde Times

Against the backdrop of the accelerating global energy transition, lithium's strategic position as the "white petroleum" has become increasingly prominent. Recently, two major lithium industry giants from China and the United States—CATL (300750) and Albemarle—almost simultaneously announced production halts, causing a huge uproar.

The two major giants are caught in a production halt controversy, causing lithium mining stocks to surge across the board.

On August 11, CATL responded on the Shenzhen Stock Exchange’s interactive platform that the company had suspended mining operations after the mining license for its Yichun project expired on August 9. The company is currently applying for the renewal of the mining license in accordance with relevant regulations and will resume production as soon as approval is obtained. This matter has little impact on the company’s overall operations.

According to the information, Yichun Times New Energy Mining Co., Ltd., a subsidiary of CATL, is one of the eight lithium-related mining enterprises in the region. It holds the mining rights for ceramic clay (containing lithium) in the Zhenkouli-Fengxin Jianxiawo mining area, located in Yifeng County, starting from August 9, 2022, and expiring on August 9, 2025, with a relatively large production capacity.

Coincidentally, just the day after the news of CATL's production halt began to spread (August 12), the market reported that another global lithium giant, Albemarle, had partially suspended its lithium carbonate production line in Chile due to production safety issues.

According to reports, Albemarle's total lithium carbonate production capacity in Chile is 80,000 tons per year. Upon verification with media and relevant personnel, they stated that they have not yet received any related information.

The suspension of lithium ore production by CATL and rumors of production halts at Albemarle's Chilean plant have triggered a "fever" in the capital market. Related concept stocks including lithium ore, salt lake lithium extraction, rare metals, and lithium batteries have collectively strengthened. Lithium carbonate futures contracts hit the daily limit, and spot lithium prices continue to rise.

According to SMM data, lithium prices have risen for five consecutive days! On August 13, the SMM battery-grade lithium carbonate index price was 80,946 yuan/ton, up 2,822 yuan/ton from the previous working day; battery-grade lithium carbonate was priced at 79,000–83,000 yuan/ton, with an average price of 81,000 yuan/ton, an increase of 3,000 yuan/ton compared to the previous working day.

New Regulations Tighten Supervision, Ending Wild Growth in the Lithium Industry

Behind the successive production halts by two major giants, the apparent reasons are the expiration of mining licenses without renewal and production safety issues, but in reality, they conceal deeper industry transformations. On one hand, compliance costs have surged due to policy changes, and major lithium-producing regions around the world have strengthened resource control. On the other hand, lithium prices have plummeted, making it difficult for high-cost production capacities to sustain.

In mid-July this year, the Natural Resources Bureau of Yichun City, Jiangxi Province, due to issues of exceeding authority in mineral rights approval, processed lithium-containing mines under the name of "ceramic clay mines." They required eight lithium-related mining companies to complete the preparation of reserve verification reports by the end of September. Among these companies is Yichun Times New Energy Mining Co., Ltd., a subsidiary of CATL.

In April 2022, CATL, through its wholly-owned subsidiary, acquired the exploration rights for ceramic clay (containing lithium) in the Jiankouli-Zhenkou area of Yifeng County, Jiangxi Province, by bidding 865 million yuan. The actual mining certificate registration for the Jiankouli mining area indicates the extracted mineral as ceramic clay, with an associated lithium oxide resource amounting to 2.6568 million tons, equivalent to approximately 6.57 million tons of lithium carbonate equivalent.

The review and regulation of lithium mining has been intensified due to the new version of the "Mineral Resources Law" that officially came into effect on July 1. The new "Mineral Resources Law" introduces a series of innovative institutional provisions in areas such as national mineral resource security, the allocation of mining rights, the nature of mining rights registration, land use for mining, and ecological restoration of mining areas.

In addition, the new Mineral Resources Law, which will take effect on July 1, 2025, classifies lithium as an independent mineral type and raises the standards for the recognition of associated minerals (requiring a lithium oxide grade of ≥0.4%). The lithium oxide content in the Jianxiawo mining area is only 0.27%, which is below the new regulatory standard. As a result, it will need to reapply for mineral type registration and faces the pressure of paying back resource taxes.

The tightening of regulatory policies is essentially aimed at curbing malignant competition born out of excessive internal rivalry and strengthening the market's survival-of-the-fittest mechanism. It is evident that a crackdown on lithium mineral resources has quietly commenced, with lithium resource development transitioning from the previous phase of unregulated expansion to a new cycle of standardized growth.

Lithium carbonate may usher in a revaluation of its value, with technological upgrades creating new opportunities.

Tianfeng Securities analyzed that the resolution of the lithium mine dispute involving CATL has representative significance for similar issues in the Jiangxi region. The expectation of a contraction in the supply of lithium carbonate has intensified, which may lead to a revaluation.

According to a research report by Caitong Securities, several lithium mines in Jiangxi may face the possibility of suspension due to mining permit approval processes, potentially affecting 7,000 to 8,000 tons of lithium carbonate equivalent per month. The tax rate for converting kaolin mines to lithium clay mines will also significantly increase costs. Combined with tighter supply and demand during the traditional peak season from September to November, multiple factors are driving up lithium carbonate prices.

From the perspective of transaction conditions, most companies are still mainly in a wait-and-see mood. However, due to certain rigid demand from downstream companies and the general reluctance of upstream suppliers and traders to sell, the transaction price of lithium carbonate spot continues to rise significantly. Considering the expected tightening of lithium carbonate supply, coupled with the peak demand season, it is anticipated that there is still room for an increase in the spot price of lithium carbonate.

Demand is providing another layer of support for lithium prices. From January to July this year, China produced and sold 8.232 million and 8.22 million new energy vehicles, representing year-on-year increases of 39.2% and 38.5%, respectively. The sales of new energy vehicles accounted for 45% of total new car sales. The cumulative installed capacity of power batteries in China reached 355.4 GWh, a year-on-year increase of 45.1%. With the arrival of the traditional peak season in September and October, demand is expected to further strengthen.

It is worth noting that in the context of stricter regulations, enterprises are striving to enhance product competitiveness by focusing on new opportunities driven by technological upgrades.

In July, the Yichun Municipal Bureau of Ecology and Environment in Jiangxi Province released the “Environmental Impact Report (Draft for Approval) for the Technological Upgrade and Renovation Project of Jiangxi Kezhi New Energy’s 10,000 t/a Lithium Carbonate Production.” The main changes of the project encompass six aspects, including upgrading the original Kezhi plant’s lithium mica roasting production line by switching the raw material from lithium mica to spodumene. Upon completion of the technological upgrade, the project will be capable of producing 10,000 tons per year of battery-grade lithium carbonate and 4,000 tons per year of iron phosphate, among other products.

In June, Zhongkuang Resources announced that, in order to further reduce production costs of lithium salt business, accelerate the transformation and upgrading of intelligent manufacturing, and deepen the green and low-carbon development model, its wholly-owned subsidiary Zhongkuang Lithium plans to carry out a comprehensive technical upgrade and transformation of its lithium salt production line with an annual capacity of 25,000 tons. The company will invest in the construction of a technical renovation project to produce 30,000 tons of high-purity lithium salt annually. It is reported that the total investment of the project is approximately 120.7 million yuan, and the shutdown for maintenance and technical renovation will take about six months.

In March, the third phase of China Minmetals' Yiliping Salt Lake lithium project successfully completed its trial production, marking a significant breakthrough for the world's first industrialized project of direct lithium extraction from salt lake brine. This technological upgrade project utilizes China Minmetals Salt Lake's independently developed "efficient lithium extraction technology from raw brine." Through innovations in the adsorption process, the comprehensive lithium recovery rate has been increased by nearly 100%, and the production cycle has been significantly shortened. It is expected to increase lithium carbonate production capacity by 15,000 tons per year.