A follow-up on CATL
MIN ASX: MinRes eyes bottom on lithium as price pain spreads to China (afr.com)
Lithium stocks jumped sharply on Wednesday based on unconfirmed reports that China’s CATL had decided to suspend its lithium lepidolite operations in Jiangxi. Lepidolite is a source of lithium ore typical in China’s geology, which is more energy-intensive and expensive to mine than the hard rock of Western Australia.
There has been speculation about CATL shutting down operations at Jiangxi for some time. The company is an integrated battery maker and can hence absorb losses from mining across other parts of its operations.
On the ASX, Pilbara Minerals added 13 per cent to $2.67 and the Gina Rinehart-backed Liontown Resources was up 13 per cent at 69¢.
Both are pure-play lithium producers, and among the top five most shorted stocks on the ASX; MinRes sits just outside the top 10.
Mr Thurlow said all lithium companies had been watching the price fall over the past 18 months, and wondering how long it would take to hit the bottom.
He told the Benchmark Mineral Intelligence conference that the CATL operations represented a sizable chunk of global supply: “It has a big implication not just here in Australia, but in the global lithium market, if you’re pulling that level of production out of the market,” he said.
For MinRes, “it’s vital to improve where we’re at from a cost perspective”.
MinRes announced cost-cutting measures late on Tuesday that will affect hundreds of workers across its biggest lithium mines in WA. The company estimates that it has found about $180 million in capital expenditure savings and $120 million in operational cost savings across 2024-25, including through roster changes and job losses.
Workers at its Wodgina and Mt Marion mines will go from two weeks on, two weeks off rosters to two weeks on, one week off. Workers who decline the new roster will be offered redundancies.
The cost cuts come after MinRes’ billionaire boss, Chris Ellison, warned in August that no one was making money at current lithium prices. He briefed analysts during a private teleconference on Wednesday.
CATL representatives at the Benchmark conference declined to confirm the speculated production cuts at Jiangxi.
Dr Perks concurred that CATL had closed or at least significantly slowed production from Jiangxi.
“It is still a rumour, but one which has been repeated by multiple sources, primarily by equity analysts in and outside of China,” he said. “It would make sense, however, as costs are relatively high and there’s only so long you can lose money, even in China.”
Lithium stocks on the ASX surged today due to news that Chinese lithium giant CATL suspended operations at its major lithium lepidolite mine in Jiangxi. This unexpected halt is projected to reduce China's lithium production by 8%, which prompted a rally in lithium prices. Stocks like Pilbara Minerals, Liontown Resources, and Core Lithium saw double-digit gains, with Pilbara Minerals up by as much as 17%.
The suspension has been viewed as a supply-side response to low lithium prices, and it is expected to tighten supply, potentially driving prices higher through the remainder of 2024.