Weekly Market Recap (Jun. 21) – A Major Lithium News This Week That You Shouldn’t Ignore

A Major Lithium News This Week
Published on: Jun 21, 2024

During a period of sustained low lithium prices, industry interest has also been waning. Consequently, the new regulations announced by the Chinese government this week regarding the lithium-ion battery industry have not generated much buzz.

However, investors shouldn’t ignore this news because it revealed a significant message: China, a major player in the lithium battery sector, is finding the rapid expansion of this industry unsustainable. This shift could alter the supply-demand structure and trends across the entire lithium supply chain.

On Wednesday, China’s Ministry of Industry and Information Technology (MIIT) released new regulations aimed at standardizing the lithium-ion battery industry. These rules encourage companies to reduce projects that solely focus on expanding capacity, emphasize technological innovation, and promote the transformation, upgrading, and high-quality development of the sector. Additionally, lithium-ion battery and ancillary projects are prohibited in protected ecological and agricultural areas; existing companies in these regions must either shut down, scale back, or gradually relocate.

Evidently, as China’s lithium-ion battery industry expands rapidly, the government is intentionally trying to control capacity. Lithium, as a critical upstream raw material in the lithium battery supply chain, will undoubtedly be significantly impacted by reduced battery production capacity.

In May last year, Azincourt Energy Corp. (TSXV: AAZ, OTCQB: AZURF)  President, CEO and Director Alex Klenman, mentioned in an interview with “METALS 100” that their Big Hill Lithium project in Newfoundland, Canada, had made positive progress and stated that the company’s stock was undervalued. Azincourt Energy is a Canadian resource exploration and development company focused on the alternative fuels/alternative energy sector.

In recent years, China’s lithium battery industry has developed rapidly. According to MIIT data, in 2023, China’s total lithium battery production exceeded 940 GWh, an increase of 25% year-on-year, with the industry’s total output value exceeding 1.4 trillion yuan. Industry association estimates suggest that in the first four months of this year, national lithium battery production exceeded 282 GWh, an increase of 17.5% year-on-year.

However, the rapid expansion of capacity in the lithium battery industry and throughout the supply chain has led to a collapse in prices for both batteries and raw materials, affecting company profits. Earlier this year, during U.S. Treasury Secretary Janet Yellen’s visit to China, she also addressed China’s overcapacity issues, particularly in the clean energy sector. In response, China stated that the competitiveness of its lithium battery industry stems from innovation and a comprehensive supply chain system.

Despite the price pressure on lithium in recent years, the long-term demand growth trend has not changed.

According to forecasts by Grand View Research, the global lithium market size is expected to grow at a compound annual growth rate (CAGR) of 17.7% from 2024 to 2030, with electric vehicle (EV) lithium-ion batteries anticipated to be a significant growth driver during this period. Under the environmental pressure to reduce carbon emissions, the automotive industry is transitioning from traditional fuel vehicles to electric vehicles, which will drive continued demand for lithium-ion batteries and lithium.

China News Clean Energy Electric Cars Lithium