CATL, the world’s largest maker of lithium-ion batteries for electric cars, has suspended operations at one of the biggest lithium mines in the country, sparking a price jump for lithium and lithium miners’ stocks.
The suspension, as reported by Bloomberg today, is part of the Chinese government’s efforts to solve a problem with overcapacity across industries that has pushed profits down and priced weaker players out of the market.
The suspension of operations at the Jianxiawo mine in the Jiangxi province is set to last for at least three months, unnamed sources told Bloomberg, giving rise to hopes that some of the overcapacity in EV-related industries would be reduced, boosting profitability.
Indeed, Bloomberg again reported today that the shares of lithium mining companies listed in Australia jumped by double digits in response to the news on hopes that this will not be the only suspension of lithium mines in China as EV adoption rates globally prove to be slower than anticipated.
The report noted that lithium prices had hit an all-time high in 2022 before shedding as much as 90% as the combination of subsidies and pending EV mandates across some key markets, such as Europe, failed to spur mass adoption of electric vehicles. This forced lithium miners to revise their expansion plans and cut spending.
The “fierce competition among EV and battery manufacturers in China for state-based incentives has led to a sharp decline in EV and battery prices, helping scale deployment, but has led to massive overcapacity in batteries,” research firm Rhodium Group said in a report in June.
Today, China’s battery manufacturing capacity is two times the demand in China and 1.2 times global demand, according to Rhodium Group. The country faces similar overcapacity in wind and solar manufacturing, despite the frantic expansion of wind and solar installations both in China and abroad.
By Irina Slav for Oilprice.com
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