Key Takeaways
- Albemarle stock jumped Wednesday following reports that Chinese battery producer CATL plans to scale back lithium production.
- Weakness in lithium prices has caused producers to reduce their workforce and abandon expansion projects.
- Slumping lithium prices have pressured shares of Albemarle, the largest producer of the metal.
Shares of Albemarle (ALB), the world’s largest lithium miner, rose more than 13% following reports that a key Chinese battery producer intends to reduce lithium production levels.
Lithium prices have tumbled in recent months amid an uncertain demand outlook for electric vehicles (EVs), whose batteries represent a key driver of demand for the metal. High levels of supply, particularly in China, have exacerbated the price weakness.
Details of Production Cuts
According to Reuters, the EV battery and energy storage system producer Contemporary Amperex Technology (CATL) on Wednesday said that it would curtail lithium production at its large mine in Yichun City in the Chinese province of Jiangxi. The mine has reportedly been a key driver of soaring lithium supply in the country.
In a research report, UBS analysts indicated that CATL’s strategy shift could reduce monthly lithium carbonate production in China by 8%. Analysts believe this could prove to be an important inflection point for the lithium market, with more balanced supply-and-demand dynamics supporting a recovery in prices while reinvigorating profitability for producers like Albemarle.
Stock Performance
The slump in lithium prices has dragged heavily on Albemarle’s share price performance. The stock fell following the lithium miner’s latest quarterly report in August, which showed a loss of $188 million for the period on a year-over-year revenue decline of nearly 40%.
Despite Wednesday’s gains, Albemarle stock is still down nearly 40% in 2024.