Why Lithium Mine Shutdowns Have Become The “Gravity Wave” Driving Price Surges

The current market is indeed quite exaggerated. At the slightest sign of trouble, there's a flurry of activity. Even "investors with bare chests climb the mountain at night to witness," regarding the suspension of production at CATL's Jianxiawo mining area, which has taken on a bit of an absurdist drama tone.

Starting from August 9th, there have been reports that CATL's Jianxiawo lithium mine has confirmed a production halt. It is reported that this halt will last for three months.

On August 11, CATL stated on the interactive platform, "After the mining license for the Yichun project expired on August 9, the company has suspended mining operations. We are in the process of promptly applying for the renewal of the mining license in accordance with relevant regulations. Once approval is obtained, we will resume production as soon as possible. This matter has a limited impact on the company's overall operations."

Influenced by the news, after hitting the daily limit on Friday, all lithium carbonate futures contracts on August 11 opened at the limit-up, with the main contract rising 8% to 81,000 yuan per ton. However, a closer look reveals that the situation is not so simple, and it is not just capital pushing the price up.

Does stopping or not stopping production have any impact?

The background of this production halt, from a policy perspective, is Beijing's strict scrutiny of overcapacity and strengthened mining inspections. In addition, this measure forms a delicate balance with the central government's policy direction towards promoting stability in the supply chain of new energy raw materials.

Securities Daily also analyzed that the new "Mineral Resources Law," which will take effect on July 1, 2025, classifies lithium as an independent mineral and raises the standards for associated minerals recognition (requiring lithium oxide grade to be ≥0.4%). This will directly affect the calculation of resource taxes and the economics of extraction. The suspension of production this time may be related to the company's need to continuously find a balance between reclassification of minerals, back payment of resource taxes, and technological iteration.

The production halt by CATL this time is related to the renewal of the mining rights of its subsidiary, Yichun Times New Energy Mining Co., Ltd. (hereinafter referred to as "Times Energy"). The mining rights it holds for the Zhenkouli—Jianxiawo mining area in Yifeng County and Fengxin County began on August 9, 2022, and will expire on August 9, 2025.

According to relevant reports, over the past month, the news that eight lithium-related mining companies in Yichun, Jiangxi need to complete the preparation of reserve verification reports by the end of September has been continuously influencing the trend of lithium carbonate prices.

It is reported that among the eight lithium mining companies, Times Energy, whose parent company is CATL, has submitted application materials for the renewal of mining rights to the Natural Resources Bureau of Yichun City, Jiangxi Province. The relevant provincial and municipal departments have also confirmed receipt of the materials. The overall progress is "relatively optimistic," but the final approval results are yet to be announced.

According to the research report by Caitong Securities, multiple lithium mines in Jiangxi may face the possibility of production suspension due to the mining license approval process, potentially affecting the equivalent of 7,000 to 8,000 tons of lithium carbonate monthly. Additionally, the conversion of kaolin mines to lithium clay mines (strategic resource designation) will significantly increase the corresponding tax rate. Combined with multiple factors, this will drive up the price of lithium carbonate.

As a leading company in the industry, CATL's lithium mining project renewal naturally affects the entire market. It's akin to the gravitational wave antenna in "The Three-Body Problem"—once it vibrates, it causes a broadcast across the galaxy.

The phrase "everything can be speculated on" illustrates that as early as the beginning of August this year, the domestic futures market had already begun speculating on the "shutdown of major factories in Jiangxi." At that time, there were significant differences between the bullish and bearish perspectives. With the confirmation of the news regarding the shutdown of Ningde Times' lithium mines, it triggered a sharp increase in lithium carbonate prices.

From a fundamental perspective, as of August 8, the domestic market average price for battery-grade lithium carbonate (99.5%) was 72,000 yuan/ton. However, after the weekend, by August 11, the futures market price had surged to the limit of 81,000 yuan/ton. Analysts at Citibank pointed out that the current price of 81,000 yuan/ton includes an expectation of a 1-2 month production halt. If subsequent extension applications are quickly approved, there may be a technical correction of 5-10%.

However, from this production halt, if lithium prices soar to the 80,000 to 90,000 yuan range, leading companies like CATL can pass on the pressure through long-term contract prices, but second-tier battery companies will be directly pressured.

Secondly, there is a 3 to 6-month lag in the transmission to the end market of new energy vehicles. Considering the battery inventory buffer and the pricing strategies of car manufacturers, if lithium prices continue to exceed 100,000 yuan per ton, the most likely scenario would be that in the fourth quarter of 2025, the pricing of new models by major car manufacturers may increase, and the prices of new energy vehicles will significantly rise next year.

Do the math on the economic accounts.

As a key raw material and strategic resource in the new energy industry, it is well known that the higher the grade of lithium ore, the lower the extraction cost.

For example, the grade of spodumene in Sichuan is generally between 1.2~1.4% (the average grade of lithium oxide in Sichuan Jiada lithium mine is 1.26%. The average grade of niobium pentoxide associated is 0.0089%, and the average grade of tantalum pentoxide is 0.0054%). If it is a self-owned mine, the mining cost is usually around 40,000 to 50,000 yuan per ton when converted to lithium carbonate. In addition to other costs such as infrastructure and environmental protection, this also...Currently, lithium carbonate One of the important reasons it won't fall.

So, in my article a few days ago titled "Finding a Billion-ton 'Lithium Mine' Still Requires Economic Calculations," I also mentioned that we can calculate the mining costs for this mine by CATL.

The lithium mica ore grade in Jiangxi Province generally ranges from 0.35% to 1.5%. The Jianxiawo lithium mica mine of CATL has an average grade of 0.27% and reserves of 960 million tons. According to industry experts' estimates, if the by-products obtained from mining are not considered, the production cost of each ton of lithium carbonate will be as high as 150,000 to 200,000 RMB.

By specifically analyzing and substituting X=0.27 into the relevant formula, it can be concluded that the ore cost is approximately 35,400 RMB/ton LCE (Lithium Carbonate Equivalent). The cost of other materials such as soda ash and sulfates is approximately 17,300 RMB/ton LCE. Other costs including direct labor, fuel and power, and manufacturing expenses are approximately 107,500 RMB/ton LCE.

The total cost of producing lithium carbonate from lepidolite ore at this mine, when adding the three components, is approximately 160,000 RMB per ton LCE (excluding tax), which is more than twice the current market price (with an average of about 72,000 RMB).

It can be seen that CATL's purpose in purchasing this mine is not purely for profit. Simply put, if the price of lithium carbonate is too low, they stop production; if the price rises, they resume operations. Since the mine has a large reserve, equivalent to 6.57 million tons of lithium carbonate, the existence of this mine means that the price of lithium carbonate is unlikely to rise above 200,000 yuan per ton in the future, thus playing a balancing role.

In addition, CATL has long made impairment provisions for the mine, including a 3.6 billion yuan impairment for fixed assets and a 3.6 billion yuan provision for mining rights. Moreover, by reducing costs through technology, they have lowered the cost of lepidolite to over 60,000 yuan, making full preparations.

This time, the suspension of production due to the expiration of mining rights was taken advantage of by capital for speculation. To put it bluntly, they just want to "fish in troubled waters." From chaos to order, there won't be many opportunities in the future.

Lithium, as a critical national strategic resource, is one of the key metals for achieving energy transition. The positive situation is that with the launch of a new round of the national mineral exploration breakthrough strategy,China's share of global lithium reserves has increased from 6% to 16.5%, rising from sixth to second place in the rankings.As reserves increase, the situation of being "choked" by overseas constraints will be alleviated.

Although China's lithium resource reserves have increased to 16.5%, high-quality resources are relatively scarce. Additionally, challenges such as high extraction difficulty and strict environmental requirements still exist, resulting in continued reliance on imported lithium concentrates and other products.

According to the statistical data from the Lithium Branch of the China Nonferrous Metals Industry Association, China's imports of lithium concentrate are approximately 4.01 million tons in 2023 and about 5.25 million tons in 2024. The latest customs data for January to May 2025 shows imports of 2.92 million tons. It is clear that the volume is still expanding.

As one of the largest lithium consumption markets in the world, the domestic market's sharp increase in demand for lithium metal has made tapping internal potential very important. This will also lead to a reshaping of the competitive landscape for lithium mining technology routes.

Industry insiders analyze that the current price of extracting lithium from lepidolite (such as the Jianxiawo mining area method) is approaching the breakeven point, while extracting lithium from salt lakes and spodumene is more resilient. Meanwhile, this event will accelerate the industry's concentration on high-grade resources, further squeezing the survival space for low-grade lepidolite mines.

Certainly, from a higher perspective, the suspension of production in this mining area by CATL largely indicates the country's attitude towards lithium mining and its determination to "combat internal competition." As a core material for new energy, the strategic significance of lithium has been recognized by the state, and protective measures are beginning to be implemented. This means that the compliance costs for lithium mining will be significantly increased in the future.

The trend of "anti-involution" will gradually clarify the direction and logic of many future events. The ultimate goal of "anti-involution" is to achieve re-inflation and bring the economy back to a positive cycle. If this ultimate goal is certain, then some measures will inevitably be strong.