Chinese lithium stocks surged overnight after Contemporary Amperex Technology Co. (CATL), the world’s largest battery maker, suspended production at its Jianxiawo mine in China’s Yichun lithium hub. The move triggered a limit-up move in lithium carbonate futures and fueled speculation that Beijing may suspend other projects as it addresses the deflationary pressures of overcapacity across the economy.
China’s anti-involution campaign to curb overcapacity – most particularly in the lithium market – has led to the temporary closure of CATL’s Jianxiawo mine, which accounts for about 6% of global output. The move comes as the battery market remains heavily pressured in a glut amid softening demand for electric vehicles and President Trump’s push to roll back green incentives in favor of common-sense energy policies.
Here’s the equity market impact:
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Tianqi Lithium +19% (Hong Kong),
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Ganfeng Lithium +21%,
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Australian miners +14 to 25%.
Lithium carbonate futures on the Guangzhou Futures Exchange hit the 8% daily limit at 75,500/ton yuan. Contract prices are 87% lower than the 600,000 yuan peak in late 2022.
Sources close with Bloomberg say operations at the Jianxiawo mine could be shuttered for at least three months. This is part of Beijing’s anti-involution campaign targeting oversupply across sectors from batteries to steel.
“I think it will mean the lithium price in the near term has very big upside,” Bank of America analyst Matty Zhao told Bloomberg in a television interview earlier.
Citigroup analysts told clients that this mine closure is “part of the government’s anti-involution initiative,” adding that it “should help China to re-price its strategic resource in the long-run, and the government can ensure lithium is mined and extracted in a proper and compliant way.”
Comments from Goldman analyst James McGeoch to clients indicate the anti-involution will be a slow-burn policy that will quietly tighten capacity in aluminum, coal, steel, lithium, EVs, etc., with its impact only materializing in about 12 months.
Here’s more from McGeoch:
Talking to trading – limit up today, most likely is same again tomorrow, feels different to 2024 (that was on back of lower prices and having a output target), this is a forced shutdown from local govt, seen as anti-involution driven. Risk of lateral damage to other mines is real …just adding to a mkt that has been normalising. The ask is do we create a deficit mkt in 2026? The 3months that CATL has indicated is unclear if the govt is also thinking 3m? What is required to restart (Permit expired, seeking renewal)….Todays trading, Limit up, CME is a really wide mkt (bids +5-6% however nothing really trading).. On Friday there was a large spodumene print (+8% or $60, at $825t fastmarkets reported, however no trades visible), today Spodumene printed +$100 to $925t, it had gone up thought the noise on prodn adjustments, then rolled down, we had thought the mkt fades it, however the price action on Friday suggested that view was changing and here we are… Today lithium onshore is RMB81k/t (lithium carbonate), limit up is +8%, feels like 100kt is the resistance level…if I can point to a comp it would be Coking Coal, it went up on noise of curtailments, haven’t seen the curtailments (weather and other factors have impacted supply nonetheless) and its stayed up. So even if there is no follow through, there is enough smoke to keep the mkt looking for the fire…. ALB US looking +c.12% having been +7% on Friday, the SI had almost halved coming into this, id call it a post Anti-Involution adjustment. There has been noise of prodn adjustments around, confirmation of does make it different. …its a dirty comparison but look at the likes of AMR/BTU/HCC. I also hold a view that Anti-Involution is real, you wont get a big headline, rather you have an initiative that will just chug along, we will look back in 12months time and the numbers will attest to the intent – Ali, Coal, Steel, Lithium, EV etc.
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