Column: Electric dreams turn into a nightmare for battery metals
A sector that was once racing to build new supply has been closing mines and deferring projects as low prices bite into the cost curve.
Lithium producers surged from Asia to the Americas on speculation Chinese battery giant Contemporary Amperex Technology Co. halted production at a major mine, easing oversupply concerns for the material.
Shares of Albemarle Corp., the world’s largest lithium miner, climbed as much as 17% in New York on Wednesday, while SQM gained as much as 12%. Pilbara Minerals Ltd. jumped as much as 17% in Sydney, while Tianqi Lithium Corp. climbed 16% in Hong Kong. UBS Group AG, citing channel checks with contacts, said CATL suspended its lithium lepidolite operation at a Jiangxi mine following a meeting on Tuesday.
Based on recent lithium market conditions, CATL plans to make adjustment to the lithium carbonate production in Yichun, according to the company spokesperson.
The stoppage will spur an 8% cut in China’s monthly lithium carbonate output and “will help rebalance the supply with demand,” UBS analysts led by Sky Han wrote in a note.
The shutdown is positive for the commodity, according to UBS, which expects 11% to 23% upside for lithium prices in the rest of 2024. While the broker cautioned that past rumors about halted operations at the mine had turned out to be incorrect, it said it received “higher conviction this time.”
Lithium shares have languished this year as a supply glut overwhelmed demand from battery manufacturers amid slower electric vehicle sales. Pilbara Minerals had closed at a two-year low on Tuesday.
In Australia, some lithium producers including Arcadium Lithium Plc and Core Lithium Ltd. were forced to shutter high-cost sites. Mine developer Global Lithium Resources Ltd. announced on Tuesday it would immediately cut expenses at its own highly prospective project, citing a longer-than-expected slump in pricing. Albemarle shut half of its current processing capacity in Australia and put expansion there on hold due to the deepening price decline.
Lithium prices may enter an upcycle starting 2026, with aggregate supply showing signs of tightening as construction in several projects including Argentina’s Sal de Vida slow down and capital expenditure contracts, Guotai Junan Securities Co. analysts wrote in a note. Lithium stocks typically start to rise six to nine months ahead of the commodity’s price, they added.
(By Paul-Alain Hunt and Georgina McKay)
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