Contemporary Amperex Technology’s suspension of production at a major lithium mine in mainland China is a clear sign of Beijing’s aggressive stance towards curbing overcapacity in the electric vehicle (EV) battery sector, according to analysts.
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The world’s largest producer of EV batteries, known as CATL, said on Sunday evening that the licence for the mine in Yichun, in China’s central Jiangxi province, had expired on Saturday.
It added that an application for restarting operations had been submitted and said the temporary production halt would have only a limited impact on the company’s businesses.
“The production halt could be a result of Beijing’s efforts to curb excess capacity in the EV battery industry,” said Ding Haifeng, a consultant at Shanghai-based financial advisory firm Integrity. “But it remains to be seen whether the government will take further steps to limit the output of lithium.”
Fluctuating prices of lithium, a key battery component, have a huge impact on the cost of electric cars. Lithium carbonate contracts on the Guangzhou Futures Exchange jumped by the daily limit of 8 per cent to 81,000 yuan (US$11,279) a tonne on Monday.
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Citigroup analysts said in a report on Monday that a 10,000 yuan per tonne increase in the price of lithium could cause CATL’s profit margin, which stood at 22.4 per cent at the end of June, to drop by 4 percentage points.