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China Cuts Lithium Output After Price Crash

Companies in China’s key lithium-producing hub have moved to reduce lithium output following the recent price collapse amid weak demand for electric vehicles (EVs), according to a Chinese publication quoted by Bloomberg.

In Yichun, the top-producing hub for lithium in China, some unnamed producers – including major ones – have reduced supply, Chinese outlet The Paper reports.   

Earlier this year, reports emerged that China had moved to supervise the extraction of lithium from lepidolite, the most abundant lithium-bearing mineral but a secondary source of this metal, in Yichun, often dubbed the ‘Asian Lithium Capital’ because of its huge lithium reserves. 

Yet, the impact of the crackdown on illegal lithium mining could be short-lived due to a bearish outlook on near-term EV demand, price reporting agency Fastmarkets said at the end of February.

Lithium prices have recently crashed due to weak Chinese EV demand. The price crash could be good news for consumers as battery costs could follow the decline of lithium prices, at least in the short term.

Still, analysts see price increases in the lithium market in the medium and long term, as demand for lithium in the energy transition will only grow. 

China accounts for a large part of the global lithium supply and dominates the global lithium-ion battery supply chain.

Bank UBS expects China to end up controlling nearly one-third of the global lithium supply by 2025. Mines controlled by Beijing, not only in China but also in Africa, will see their total lithium output jump more than threefold in just three years—from 194,000 tons in 2022 to 705,000 tons by 2025, UBS said in a note last month, carried by Bloomberg.

This surge in supply would raise the Chinese share of global lithium supply to 32% in 2025, up from 24% in 2022, the bank said.  

China currently hosts 75% of all battery cell manufacturing capacity and 90% of anode and electrolyte production, according to BloombergNEF (BNEF).

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By Tsvetana Paraskova for Oilprice.com

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