Closure Of Lithium Mine In China Sees Uptick In Lithium Prices
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October 14, 2024 08:45 AM Eastern Daylight Time
By Kyle Anthony, Benzinga
Generally, price movement in an asset class can be attributed to several factors, but for commodities, the underlying principles of supply and demand are often the primary reasons. Bloomberg recently reported that Chinese battery giant Contemporary Amperex Technology Co., commonly called CATL, has shut down its major lithium mine in Jiangxi province. Jiangxi is a substantial source of lithium carbonate, with estimates that it accounted for 5% to 6% of global supply. CATL is currently the world’s largest battery manufacturer, with a market share of 34%.
The Ripple Effects Of The Mine Closure
News of the mine’s closure had a catalyzing effect on the stock prices of lithium miners, as firms from Asia to the Americas saw an uptick in their equity prices. As S&P Global reported earlier this year, lithium prices have declined for a prolonged period due to the metal’s oversupply and that demand for EVs, particularly outside of China, slowed earlier this year.
As noted in the Bloomberg report, CATL’s stoppage will likely spur an 8% cut in China’s monthly lithium carbonate output. However, much inventory of the metal remains, with recent reporting positing that a historically high level of 130 kilotons is in storage. Though CATL’s mine closure has created a potential opportunity for the metal’s price appreciation.
Gaining Exposure To Lithium Miners With Sprott
With lithium prices being at or close to their floor, a reduction in supply could potentially have a supportive impact on its price. For investors seeking pure-play exposure to the lithium industry, the Sprott Lithium Miners ETF (NASDAQ: LITP) is a turnkey solution that tracks the Nasdaq Sprott Lithium Miners™ Index, which is designed to track the performance of companies that derive at least 50% of their revenue and/or assets from mining, exploration, development or production of lithium. The index generally consists of 40 to 50 constituents.
Lithium plays a pivotal part in battery construction. The movement of lithium ions back and forth between the anode and cathode of a battery generates the free electrons in the anode, producing the actual charge at the positive end of the battery. That charge flows into a vehicle’s motor or the electronics being powered. The lithium market is of interest to some companies that are looking to replace internal combustion engine vehicles with EVs in the years to come.
As argued in Sprott’s summary report 5 Reasons to Invest in Lithium Miners, as electric vehicles and energy storage technologies potentially become mainstays in the global economy, the companies that reflect the value of battery materials may represent or become a source of wealth-building for investors.
Featured photo by MiningWatch Portugal on Unsplash.
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