Lithium Miners Shares Surge on Possible CATL Supply Cut

By Sherry Qin

Miners of lithium have been searching for a spark in recent months despite the metal's key role in the energy transition. Now, they may have found one.

The world's biggest maker of batteries for electric vehicles, China's Contemporary Amperex Technology, is considering the suspension of some lithium mining and production operations, according to a research report by Citi. The company, better known as CATL, is weighing whether to mothball its lepidolite mine in eastern China and one of its three lithium carbonate production lines, the bank said.

Lithium has become a cautionary tale for traders attempting to ride a wave of spending as the world pivots away from fossil fuels. While lithium-ion batteries are key to powering EVs, among other things, consumers have been slower to make the switch from gas-powered cars than many investors and auto executives envisaged. Prices have plunged to multiyear lows this year, as unexpectedly sluggish demand coincided with new mines starting up.

CATL hasn't confirmed the news of the potential suspensions to investors, and it didn't respond to a request for comment. Still, investors took the opportunity to buy shares in lithium producers on hopes that an easing in the global supply glut of the material could be imminent.

In Australia, shares in Mineral Resources advanced as much as 22%, taking its value to around $4.8 billion, just two days after Fitch Ratings revised its outlook on the company to negative partly due to the drop in lithium prices. Local rivals Pilbara Minerals and Liontown Resources each rose by 14%.

Elsewhere, Ganfeng Lithium rose 8.75% in Hong Kong and was up 7.5% in Shenzhen at midday. Tianqi Lithium surged 12% in Hong Kong and its A shares advanced 10%, the maximum daily rise permitted in mainland China's market.

Citi said CATL's suspensions wouldn't have a big near-term impact. But the company could choose to take its two other lithium carbonate lines offline later, removing as much as 6,000 metric tons of supply from the market each month, the bank estimated.

Around the world, miners have also sought to ride out the downturn in lithium prices by slashing costs and putting off new projects. Arcadium Lithium, for example, has paused its Galaxy spodumene project in Canada and deferred some brine expansions in Argentina.

Those decisions have been stoking confidence that lithium prices can rebound, analysts said.

Write to Sherry Qin at sherry.qin@wsj.com

(END) Dow Jones Newswires

September 11, 2024 01:20 ET (05:20 GMT)

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