China's Lithium Market Rallies After CATL Mine Closure and Regulatory Clampdown

China’s lithium sector is undergoing a significant transformation following the unexpected shutdown of CATL’s Jianxiawo mine in Yichun, Jiangxi province. The closure, announced on August 11, 2025, triggered a sharp rise in lithium prices on Chinese exchanges and a global stock rally among lithium producers. This move appears to be part of a broader government-led "anti-involution" initiative aimed at addressing overcapacity and stabilizing the lithium market [1].

The Jianxiawo mine, which contributes approximately 6% of global lithium output, will remain offline for at least three months while CATL seeks to renew its mining license. While the company did not explicitly link the shutdown to government policy, the timing aligns with regulatory scrutiny across the industry [1]. Jiangxi province, known as China’s “lithium capital,” has seen authorities conduct inspections of eight lithium producers in the Yichun area. The provincial Bureau of Natural Resources has also required these operators to submit detailed reserve reports by September 2025, raising uncertainty over future production authorizations [1].

Beyond Jiangxi, Qinghai authorities have ordered Zangge Mining to halt operations due to alleged illegal mining activities. These coordinated actions suggest a more centralized and controlled approach to lithium production in China [1]. The move comes in response to a 90% decline in lithium prices since their 2022 peak of nearly 600,000 yuan per ton, reaching approximately 60,000 yuan per ton in early 2025 [1].

Cameron Perks of Benchmark Mineral Intelligence highlighted that Jiangxi accounts for 10% of global lithium production and emphasized the potential for broader enforcement actions if the government continues its interventionist strategy [1]. China controls roughly 60% of global lithium processing capacity, meaning any tightening of supply could have cascading effects on global markets [1].

The immediate market response to the mine closure was pronounced. Lithium carbonate futures on the Guangzhou Futures Exchange surged by the daily limit of 8%, jumping from 75,000 yuan per ton to 81,000 yuan per ton within days. Physical spodumene prices followed suit, signaling a rapid transmission of Chinese market movements to international pricing mechanisms [1].

Globally, lithium-related stocks experienced one of their strongest rallies in months. Albemarle Corporation (ALB) saw a 9.86% increase, reaching $82.92 on August 11. Chinese producers such as Tianqi Lithium and Ganfeng Lithium surged by as much as 19% and 21%, respectively, in Hong Kong trading. Australian miners also benefited, with PLS Ltd. and Liontown Resources rising 19% and 25% in Sydney [1].

Analysts suggest that the market reaction may be slightly ahead of actual supply disruptions, with investors factoring in the possibility of expanded regulatory enforcement. Matty Zhao of Bank of America noted that lithium prices in the near term could see “very big upside,” reflecting growing expectations that Chinese authorities may broaden their intervention to stabilize the market [1].

These developments signal a potential shift in China’s approach to managing its lithium sector. By leveraging its dominant role in both production and processing, the country could reshape global lithium supply chains at a critical time for the electric vehicle industry, which depends on stable and predictable raw material availability [1].

Source: [1] [https://coinmarketcap.com/community/articles/689a1a6214fafa6f2d11d3d5/](https://coinmarketcap.com/community/articles/689a1a6214fafa6f2d11d3d5/)