FACTBOX: China's lithium industry eyes output cuts to shore up market sentiment

Chinese lithium industry watchers are looking for cues on production cuts to gauge near-term market conditions as oversupply concerns cloud the long-term outlook. They are also looking at project suspensions or slowdowns to get a handle on what the medium to long-term supply conditions will look like.

Globally, China ranks ninth in lithium resources, but controls more than 60% of battery-grade global lithium refining, according to data from S&P Global Market Intelligence and World Economic Forum. Given China's dominance, any fundamental weakness in Asia's biggest economy has a bearing on the global market.

Chinese lithium prices reached an all-time high in late 2022, as several participants secured lithium supplies in China and overseas, in a bid to capitalize on the country's robust electric vehicle demand.

However, since then, rising supplies and inventories have pushed prices lower and forced players to make widespread output cuts. Platts assessed battery-grade lithium carbonate prices on a delivered, duty-paid China basis, have slumped 87.3% from their record high in November 2022.

Some lithium chemical converters in China are operating in losses and oversupply conditions are yet to see a reversal, industry sources said.

Global lithium chemical supply-demand gap is expected to close only in 2028 with the market to remain oversupplied until then, estimates by S&P Global Commodity Insights showed.

China's largest battery maker Contemporary Amperex Technology, or CATL, was heard scaling back its lithium operations in Jiangxi -- a development sources said was due to higher production costs and soft prices.

While its impact is yet to be seen on the supply-side, the move could push other lithium miners and chemicals producers to re-assess their operations, sources said, adding that it would help rebalance lithium supply-demand conditions in China.

Participants are also closely eyeing EV sales over September and October, a period when vehicle consumption is typically higher in China, sources said, adding that higher sales would help support sentiment in China's lithium market.

In 2024, China's EV sales are expected to account for 63% of the total global sales, according to Commodity Insights data.

Infrastructure

**CATL suspended lithium mining activities in Jiangxi, China, citing higher operational costs amid current weak market prices, according to sources.

**Another major battery player in China is expected to stop production of lithium ores and chemicals in Jiangxi, sources said.

**China-based lithium producer Jiangxi Jiuling Lithium suspended production at its Chunyou Lithium mining unit for maintenance and paused operations at its dressing plant Jiuyu Lithium, as per sources.

**Australia-based Global Lithium Resources said it was scaling back work on a feasibility study of its Manna lithium project in Australia due to weak prices.

**China-based lithium ore seller Jiangxi Magao New Materials said it will halt production at its two dressing plants in Nigeria's OYO and KOMU mines. It is also suspending its lithium concentrates business in China.

**Another Chinese lithium miner Jiangxi Dongbao Mining said it will halt its lithium concentrate business in Nigeria, Zimbabwe, Madagascar and Mali for six months.

**Jiangxi Dongbao has canceled purchasing plans for lithium concentrate and carbonate from Australia, Chile, and Argentina.

**Global lithium miner Arcadium Lithium said it will suspend production-related activities at its Mt Cattlin spodumene operation in Australia. It also plans to place Mt Cattlin site into care and maintenance at the end of the first half of 2025.

**Arcadium Lithium said it was pausing investments in its 40,000 metric tons spodumene Galaxy project in Canada.

**Arcadium is also revising sequencing plans for its combined 25,000 t lithium carbonate projects in Argentina, and no longer plans to execute an expansion simultaneously as previously announced.

Prices

**Prices of Chinese lithium hydroxide and carbonate remained in a range of Yuan 70,000-75,000/t ($9,875-$10,580/mt) over July-August, according to Commodity Insights data.

**Platts assessed battery-grade lithium carbonate at Yuan 75,000/t Sept. 17 on a delivered, duty-paid China basis, down 23.5% so far this year, and 87.3% lower from a record high in November 2022, Commodity Insights data showed.

**China's only listed lithium carbonate contract on the Guangzhou Futures Exchange erased gains seen over early September. The most-active lithium contract on the GFE closed at Yuan 75,700 Sept. 19, slumping 52.5% on the year, the exchange data showed.

**Platts assessed lithium spodumene concentrate with lithium oxide content of 5.5% CIF China at $715/mt, according to Commodity Insights data.

**Buying interest for lithium in China has remained thin so far and most market participants are awaiting cues on output and prices, sources said.

**Prices of lithium carbonate minimum 99.5% CIF North Asia are seen at $12,627/t over 2024, down 82% from 2022 levels, according to Commodity Insights data.

Trade flows

**Global lithium chemical supply is expected to remain around 9.2% higher than consumption in 2024, as per Commodity Insights data.

**Chile's lithium exports to China fell to their lowest level in nine months in August -- down 11.3% on the year at 18,145 t, latest customs data showed.

**Australia's exports of spodumene to China jumped 35.7% on the year to 101,116 t, according to port data. Spodumene is further processed into lithium.

**China's EV market share to total vehicles reached an all-time high of 44.8% in August, China Association of Automobile Manufacturers said.

**Meanwhile, the country's EV exports reached 818,000 units in the first eight months of the year, up 12.6% from the same period last year.

**China's lithium carbonate and hydroxide output reached 53,000 t and 32,000 t in July, down 7.5% and 12.4%, respectively, from June, according to the China Nonferrous Metals Industry Association.