China lithium futures ride environmental rollercoaster

Jiangxi, China. Stock image.

China’s lithium carbonate futures prices rebounded on Wednesday after sentiment was stirred by a market speculation that operations in a major production hub may face environmental inspections that could lead to output restrictions.

The most-active July contract on the Guangzhou Futures Exchange surged by 10% to touch an intraday high of 103,000 yuan a metric ton earlier the session, its highest since Jan. 25.

The contract surrendered some earlier gains and closed daytime trade 3.47% higher at 96,900 yuan a ton after sentiment cooled the afternoon.

The price rally was ignited by a market talk that Yichun, a city in the southern province of Jiangxi, will face environmental checks and producers that are unable to properly handle lithium slag may face curbs on their operations.

The environmental bureau in Yichun city and Jiangxi province did not respond to Reuters requests for comment.

Yongxing Special Materials Technology, whose subsidiary in Yichun was said to have been affected, could not be reached for comment.

Jiangxi accounts for at least a quarter of China’s total supply of lithium carbonate, information provider ICC says.

Several producers in Jiangxi denied to have faced environmental inspection-induced production halts, ICC analysts said in a note.

Major lithium salt producers in Jiangxi are still operating in line with their production plans while scheduled maintenance among some producers was underway, a survey from information provider Shanghai Metals Market (SMM) showed.

Jiangxi has faced increasingly prominent environmental issues especially after it has become a major lithium production hub amid China’s drive for self-reliance in the material used in electric vehicle batteries.

The output of lithium carbonate made from lepidolite is estimated at 7,750 tons in February, down 33% from the prior month, due to a week-long Lunar New Year holiday and annual maintenance among plants, SMM analysts said in a note, forecasting March production to climb by 64% on the month to 12,730 tons.

SMM pegged China’s total February lithium carbonate output at 32,005 tons, with a monthly fall of 17%, while the March output will climb by 30% on the month to 44,048 tons.

The futures price surge came after Australian lithium stocks rallied on Monday on speculation that Chinese battery maker CATL had closed its Jianxiawo mine in China.

CATL did not respond to a Reuters request for comment.

Spot prices, however, were immune from the buying in the futures market and continued a downtrend amid a supply glut that had caused a price slump of more than a half in 2023 versus the 2022 level and is expected to continue in 2024.

(By Amy Lv, Melanie Burton and Zoey Zhang; Editing by Tom Hogue, Sonali Paul and David Evans)


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