Lithium Prices And Shares Rise As China Halt Eases Glut Worries
The halt comes as the global lithium market grapples with oversupply of the material, and the domestic sector faces tighter scrutiny from Beijing.
Lithium prices and company shares surged after a Chinese producer said it was ordered by local authorities to halt mining of the battery material, easing concerns of a lingering global glut of the the battery metal.
Zangge Mining Co. said a fully owned unit received a notice on Wednesday from the government in Haixi in the western province of Qinghai to immediately stop illegal mining activities, and to adhere to the rules that govern lithium resources.
The company, which expects to produce 11,000 tons of lithium carbonate this year, said it’s working on the relevant documentation for lithium exploration and plans to apply to resume output once that’s completed, according to a filing to the Shenzhen stock exchange on Thursday.
The halt comes as the global lithium market grapples with oversupply of the material, and the domestic sector faces tighter scrutiny from Beijing, which has pledged to regulate excessive price competition across a host of industries.
The most-active lithium carbonate contract on the Guangzhou Futures Exchange rose as much as 5.5% before paring gains to 2.5% on Thursday. Shares of battery-metal producers also jumped, including gains of as much as 4.4% for Tianqi Lithium Corp. and 3.6% for Ganfeng Lithium Group Co. Despite the halt, Zangge Mining rose as much as 2.6%.
In New York trading Thursday, the two biggest lithium producers, Albemarle Corp. and SQM US, were up 7.1% and 8.4%, respectively, at 11:14 a.m. in New York. BTG Pactual analyst Cesar Perez-Novoa attributed the surge in shares to the China production halt, which feeds into the notion of stubbornly low prices starting to curb supply.
“That adds to the decommissioning of high-cost and environmentally damaging capacity,” Perez-Novoa said by telephone from Santiago.
To be sure, Zangge is mainly a producer of potash used in fertilizers. But it got about a third of its operating revenue from lithium extracted from salt lakes last year. Zijin Mining Group Co. said at the start of the year it would buy about a quarter of the company for $1.9 billion.
Zangge said in its statement that the mining halt won’t have much impact on its overall performance. It estimated the lithium unit produced 5,350 tons in the first half, generating profit of 49 million yuan ($7 million).
