Shares in Australian lithium producers are being sold down on Monday after media reports that Chinese battery giant CATL could restart production at its flagship mine as soon as next month.
Lithium prices have been trending sharply higher in recent weeks, following a sell-off in late August, which has taken the share prices of Australian producers higher.
Large Chinese mine could restart soon
But the bull run appears to have hit a hiccup in the past couple of days, after Bloomberg reported that CATL was planning to restart production at its mine in Jiangxi Province, where mining was halted in August.
Reports have put the mine's production at about 3% of global lithium production, and CATL has been making progress in recent weeks to have its mining permit at the project reinstated.
The Bloomberg report said unnamed sources had confirmed that the battery maker had formulated a preliminary plan to restart the mine by early December, and had also asked its suppliers and partners to ready themselves in anticipation of production recommencing.
The report said CATL had not responded to requests to comment on the speculation.
Aussie shares bear the brunt
Shares in Australian lithium producers were leading falls among S&P/ASX 200 Index (ASX: XJO) companies on Monday, with the Gina Rinehart-backed Liontown Resources Ltd (ASX: LTR) down 3.4% to $1.42.
Shares in Mineral Resources Ltd (ASX: MIN) were 2.6% lower at $47.55, IGO Ltd (ASX: IGO) was off 2.6% at $6.30, and Pilbara Minerals Ltd (ASX: PLS) shares were 2.3% lower at $3.81.
Reuters was reporting late last week that the CATL news pushed lithium prices quoted on the Guangzhou Futures Exchange sharply lower, down 9% on Friday, after hitting the highest levels since June 2024 the previous day.
New lithium cycle to underpin gains
The team at Macquarie remains bullish on lithium, stating in a research note to clients last week that a new lithium cycle has begun.
As they said in their note to clients:
As highlighted in our September note, we identified early signs of a new lithium cycle, driven by a widening imbalance between supply and demand. This constructive view has been validated by the market over the past two months, evidenced by continued inventory drawdowns and a steady increase in spot spodumene prices.
Macquarie's top picks in the lithium sector were IGO, Elevra Lithium Ltd (ASX: ELV), and Patriot Battery Metals Ltd (ASX: PMT).
Among other shares, it has a neutral rating on Atlantic Lithium Ltd (ASX: A11) and an underperform rating on Liontown.
