Albemarle was the top S&P 500 gainer early Monday morning after Tesla supplier CATL, China's biggest battery producer, said it idled production at a major lithium mine after its permit expired. ALB stock jumped, while the S&P 500 edged higher, after finishing last week just below an all-time closing high.
Other lithium stocks also are sharply higher, including Sociedad Quimica y Minera de Chile, Lithium Americas, Piedmont Lithium and Sigma Lithium. It remains to be seen how seriously China is cracking down on lithium oversupply and whether a true inflection point was at hand for lithium prices, which had tumbled through the first half of the year, and remain far below their 2022 peak.
Tesla stock is higher early Monday, despite a jump in lithium market prices. Tighter supplies could raise the cost of lithium batteries, but it would take time for longer-term Tesla supply contracts to be affected.
CATL Mine Output Halted
CATL said Sunday that its license for a mine in Yichun, in China's central Jiangxi province, had expired, according to a report in the South China Morning Post. The article included analyst comments that the idled mine was a potential indication of Beijing's "aggressive stance toward curbing overcapacity" for lithium-based EV batteries.
However, artificially boosting lithium prices could be negative for the profits of Chinese EV makers. That would run counter to Beijing's efforts to limit fallout from intense price competition among EV makers.
CATL said it submitted an application to restart operations. A Bloomberg article indicated that the suspension could last for at least three months.
Barron's noted that the shuttered CATL lithium mine accounts for about 8% of global supply.
Lithium Prices: Inflection Or Head Fake?
The futures contract for lithium carbonate on the Guangzhou Futures Exchange jumped 8% on Monday – the maximum daily increase — to 81,000 yuan per ton. That equates to $11,278 per metric ton. According to Trading Economics data, the lithium carbonate spot has jumped by about one-third since bottoming near 60,000 yuan in late June.
That has come as analysts anticipated Beijing could crack down on oversupply ahead of a series of permit renewals.
However, the longer-term trend is still bleak. After collapsing during the pandemic, lithium carbonate prices exploded higher in 2021 and 2022, reaching around 600,000 yuan per ton amid undersupply concerns on weaker-than-expected EV demand.
Citi analyst Jack Shang predicted that lithium carbonate futures could fall back to around $10,000 per metric ton after an abbreviated rally, Barron's wrote.
ALB Stock Downgrades
Baird downgraded ALB stock to underperform from neutral on July 29, according to a write-up by The Fly investment news site. The research firm said that investors are looking ahead to Albemarle's contract negotiations for 2026, which could lock in low prices.
KeyBanc downgraded Albemarle to sector weight from overweight on July 30, seeing its recent rally as a chance to reduce risk. The firm said that lithium prices are below the level needed to green light reinvestment in capacity, which is unsustainable over the longer term, The Fly said.
Albemarle stock jumped 8.3%. SQM leaped 7.5%, gapping above a 42.31 buy point from a cup-with-handle base, according to MarketSurge. SQM rose beyond the buy zone, which runs through 44.43.
Lithium Americas and Piedmont Lithium both jumped around 9%, while Sigma Lithium surged 18%.
Tesla rose 3.5%, climbing in a buy zone amid comments from CEO Elon Musk. The S&P 500 inched up 0.1% as it eyes a possible new closing high.
Be sure to read IBD's The Big Picture column after each trading day to get the latest on the prevailing stock market trend and what it means for your trading decisions.
