Technology
UBS Group has released a research report today indicating that Contemporary Amperex Technology Co., Limited (CATL) has decided to halt its lithium mica mining operations in Jiangxi, following a meeting on September 10. This decision is based on multiple confirmations by UBS analysts.
Back on April 20, 2022, CATL’s subsidiary, Yichun Times New Energy Mining Co., Ltd., won the exploration rights for ceramic soil (which contains lithium) in the Zhenkouli-Fengxin County mine area in Yifeng County, Jiangxi Province. The successful bid was priced at 865 million yuan. Based on the average lithium oxide grade, securities analysts had previously estimated that this lithium mine could produce up to 200,000 tons of lithium carbonate per year.
Rumors of a production halt at CATL’s Jiangxi lithium mine had been circulating in the market since the beginning of the year, coinciding with a persistent downtrend in lithium carbonate prices. CATL had previously denied these rumors.
According to the UBS report, this isn’t the first instance of CATL reportedly reducing or suspending production at the Jiangxi lithium mine. Though earlier reports were eventually dismissed as speculation, the current information appears to be more credible. The report suggests that the decision to suspend mining operations was driven by the falling prices of lithium carbonate, which have dropped below CATL’s mining costs. CATL’s cash cost for mining lithium carbonate is $10,968 per ton (excluding taxes), or 89,000 yuan per ton (including taxes). Data from the Shanghai Nonferrous Network shows that since mid-July 2024, the spot price of lithium carbonate has consistently been lower than CATL’s cash cost level.
Compared to the start of the year, when the price was around 100,000 yuan per ton, the price of battery-grade lithium carbonate has seen a decline of over 25% this year. In 2023, the price of battery-grade lithium carbonate plummeted from about 500,000 yuan per ton to 100,000 yuan per ton by year-end, marking a staggering 80% drop.
UBS’s report predicts that CATL’s decision to suspend production at the Jiangxi lithium mine could lead to an 8% reduction in China’s monthly lithium carbonate output, equivalent to 5,000-6,000 tons of lithium carbonate. This could potentially provide some support for lithium carbonate prices. The report also anticipates an 11%-23% increase in lithium prices from now until the end of 2024. Once lithium prices reach $10,968 per ton (excluding VAT), CATL may consider resuming its lithium operations.
On the afternoon of the 11th, in response to an inquiry from Chinese media outlet Yicai, CATL announced that it is planning to adjust its production arrangements for Yichun lithium carbonate, based on the recent market conditions for lithium carbonate.
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