Lithium prices in China experienced a sharp increase on Wednesday following a significant regulatory action by the natural resource authority overseeing the country’s primary lithium-producing region.
The authority announced its decision to revoke 27 existing mining licences, according to a Reuters report.
This unexpected crackdown on a substantial number of operations immediately tightened the supply outlook for the crucial battery metal.
China is a dominant force in the global lithium supply chain, and the withdrawal of these licences signals a significant disruption that is expected to sustain upward pressure on prices as the market adjusts to the reduced availability of the raw material.
Regulatory action and immediate market impact
The lithium market witnessed a significant surge on the Guangzhou Futures Exchange, with the most-active lithium carbonate contract experiencing a sharp rise after the announcement.
The contract, which tracks the price of the key battery material, climbed to an intra-day high of 109,860 yuan per metric ton, equivalent to approximately $15,592.27.
This peak marked the highest price point for the contract since June 2024, signaling renewed bullish sentiment in the market.
Although the contract slightly pared its gains by the closing bell, it still finished the trading session robustly.
The contract ultimately settled at 108,620 yuan, securing a substantial daily increase of 7.61%.
This notable jump in the price of lithium carbonate futures also reflects growing demand expectations and supply tightness, as the commodity is critical for the production of electric vehicle (EV) batteries and other energy storage solutions.
The sharp rebound suggests a turnaround from earlier price troughs, driven by factors such as anticipated policy support, restocking activities by downstream manufacturers, and a generally improved outlook for the global EV sector.
Yichun mining permit revocations
The Bureau of Natural Resources in Yichun, a key lithium production hub in China’s Jiangxi province, has announced a significant plan to revoke 27 mining permits.
This decision, publicised on the bureau’s official website on Friday, is currently under public consultation.
The public has until January 22 to provide feedback on the proposed cancellations.
This action in one of the world’s major lithium centers highlights ongoing regulatory scrutiny within the mining sector.
The outcome of this consultation and the subsequent cancellation of the permits could have implications for lithium supply and the regional mining landscape.
According to the list, all the licenses had expired, some over ten years ago, and were primarily registered for the mining of ceramic clay or limestone.
Jiangxi Special Electric Motor has submitted an objection to local authorities regarding a lithium-bearing ceramic stone mine permit that it holds.
According to the bureau, this permit had expired on September 15, 2024. The company announced its objection on Wednesday.
Analyst view and alternative price drivers
According to analysts at the Chinese brokerage Galaxy Futures, the supply of the commodity will likely remain unaffected by the licence cancellations.
This is because none of the permits that were revoked were for mines that are currently operating.
The rising price of lithium carbonate has been fueled by investor worries about future supply, stemming from a recent suspension of mining at the Jianxiawo mine, held by CATL.
This suspension occurred in August following the expiration of its mining license.
Growing demand from the energy storage sector has provided additional support to the price increase.
This recent event is part of a larger trend of licence clean-ups in Yichun, which began in September, with the latest action being the revocation of six mining permits on November 27.
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