Production resumes in China’s Yichun, ‘Asia’s lithium capital’, unlikely to affect supply chain, analysts say

Some lepidolite mines restarted mining activity on Monday, according to Chinese media outlet Cailian

Last week’s disruption hasn’t lent any support to falling lithium prices yet, Rystad Energy analyst says

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A lithium battery factory in China’s eastern Jiangsu province. Photo: AFP

Published: 7:30am, 1 Mar 2023

Production has resumed in China’s Yichun, “Asia’s lithium capital”, after a government investigation into illegal mining activity last week temporarily halted production in the local lithium industry.

Some lepidolite mines restarted mining activity on Monday, according to Chinese media outlet Cailian. Soon after news of the production resumption emerged, the shares of leading lithium producers with mines in Yichun rose slightly on Tuesday. Shenzhen-listed Anshan Heavy Duty Mining Machinery, for instance, rose 2.25 per cent.

“The reasons for the quick approval for production resumption remain unclear,” said Dennies Ip and Leo Ho, analysts at Daiwa Capital Markets. Another production halt was, however, possible during China’s annual National People’s Congress in early March, they added.

Yichun, which is home to the world’s largest mine for lithium-bearing mineral lepidolite and has a reserve of 1.1 million tonnes of lithium oxide, represents 31 per cent of China’s recoverable lithium oxide output and 12 per cent of the world’s output, according to official data.

The local government, which touts the city as “Asia’s lithium capital”, has attracted leading companies in the lithium supply chain – including Contemporary Amperex Technology Limited (CATL), the world’s largest electric vehicle (EV) battery maker, and BYD, the world’s largest EV maker – to the city, as the country actively embraces EVs powered by lithium batteries to achieve its carbon neutral goal.

Last week’s production halt, which led to a brief recovery in lithium carbonate prices after months of declines, came after a post by the government of Yichun in China’s southern Jiangxi province on WeChat calling for a crackdown on illegal and environmentally-unfriendly mining activity.