VINACHEM

Chinese markets for lithium, a key battery metal, are seeing heightened volatility after investors bid up prices to guard against possible supply disruptions.

Lithium carbonate traded on the Guangzhou Futures Exchange rose by its daily limit of 8% on Friday, capping a 14% gain for the week. That prompted the bourse to issue a notice reining in speculative trades, which helped push futures limit down on Monday. Shares of producers have also jumped, with Tianqi Lithium Corp. and Chengxin Lithium Group Co. both rallying around 25% this month in Shenzhen.

The gains came after moves that could ultimately lead to less supply amid growing anxiety over the production outlook, as well as the government’s focus on curbing industries with too much capacity as part of its campaign against so-called involution.

“Speculative trading on the back of market noise has led to a sharp rise in prices,” said Robin Tisserand, head of battery metals at brokerage SCB Group. That’s lifted physical prices of spodumene and caused huge volatility on international contracts run by CME Group, he said.

The lithium market isn’t a stranger to turmoil and wild swings in value. After hitting a record of nearly 600,000 yuan ($84,000) a ton in 2022, spot prices sank to about 60,000 yuan earlier this year due to a supply glut and signs of slower growth in demand for electric vehicle batteries.

The collapse has put the market on notice for action that could curb oversupply. Jiangxi, and its lithium hub of Yichun, are a particular focus. The province is forecast to account for about 10% of the world’s mined production of the mineral this year, said lithium product director Cameron Perks at consultancy Benchmark Mineral Intelligence.

The Yichun Bureau of Natural Resources earlier this month asked eight miners to submit reserves reports by the end of September, following an audit that found non-compliance in the registration and approvals process, according to notes from brokers and analysts including Jefferies Financial Group. Calls to the local government went unanswered.

Last week, Jiangxi Special Electric Motor Co. said its Yichun unit will suspend its lithium salt lines for about 26 days, citing cost cutting and maintenance. Sinomine Resource Group Co. said in June it will halt a project in Jiangxi for six months as it adjusts its technology.

Other centers are also drawing scrutiny, with Zangge Mining Co. ordered by the authorities in Qinghai province last month to halt illegal mining.

“While the volume impact is insignificant at the moment, the concern is whether mining rights inspection will be used to control supply, especially under the anti-involution environment,” Jefferies said in a note on Friday, citing “expectations of strengthened inspections, which could then tighten the market if strictly executed.”  –  Source: mining.com