A lithium carbonate plant in Northwest China's Qinghai Province Photo: cnsphoto

Supervision officials have been dispatched to Yichun, a city in East China's Jiangxi Province that is rich in lithium resources, to investigate and supervise the local mining sector, in what could be a new round of scrutiny in the country's lithium industry for sustainable and healthy development amid a boom in China's new-energy vehicle (NEV) industry.

This came as media reports said that local people were unregulatedly extracting the "white stone," an alternative name for lepidolite, the raw material of lithium, to sell it in the burgeoning new energy industry. The investigation has led to a thorough scrutiny of the mining sector in the region, with some miners currently suspended from operation indefinitely, insiders said.

Yichun, which makes up 23 percent of China's lithium resources and 12 percent of the global output, holds an important part in the supply chain. 

As the world's largest reserve of polymetallic associated lepidolite, Yichun had  an output of lithium salts which reached 85,000 tons in 2021, accounting for 28.5 percent of the country's total output.

Given the significance of the city in lithium supply, the recent investigation and rectification campaign  will inject new impetus to the sustainable development of the whole industry, experts said.

Ramp-up scrutiny
Working groups, including officials from the Ministry of Public Security and the Ministry of Natural Resources, were dispatched to the city in the last week to investigate the local lithium mining situation, the domestic news portal Yicai.com said, citing government officials in Yichun. The article on the chaos in Yichun's lithium mining sector has attracted a lot of public attention.

According to the report, certain local villagers were obsessed with mining lepidolite ore in local mining sites including mountains and woods to sell on, as surging orders for NEVs in China in recent years have boosted demand and prices of lithium batteries.

The price of lithium carbonate, for example, surged from less than 100,000 yuan ($14,380) per ton in 2021 to about 590,000 yuan per ton in November 2022, data from bulk commodity service provider Mysteel showed.

According to the Caijing report, some Yichun villagers might make up to 1,000 yuan a day by digging up lepidolite ore. In comparison, many rural residents of Yichun earned less than 1,600 yuan per month in 2021.

Meanwhile, the unregulated extraction has caused chaos, including environmental damage and exploitation without a license. Several truck accidents have happened in certain mining areas of Yichun in the recent past, as the large-scale operation of transport vehicles by lithium companies has affected transportation, the Yicai.com report said.

In response to the chaotic situation, Yuanzhou district in the city of Yichun issued a notice on Friday, pledging to crack down on illegal and criminal behavior such as unauthorized private mining and unlicensed mining involving the lithium-battery new energy industry.

An employee at the Yichun government confirmed to the Global Times the details of the case, saying that investigations are still underway.

Following the announcement issued by Yuanzhou district, the local lepidolite mining and beneficiation production line has been shut down, while the smelting production line has not been affected, according to media reports.

Several industry insiders in the region expressed their support for stronger scrutiny of the mining sector when they were reached out to by the Global Times on Monday.

A Yichun-based industry player told the Global Times that the investigation is mainly targeting the mining situation in the upper stream.

A downstream industry participant, who focuses on battery-making, said the company welcomes the investigation as it helps regulate the market and ensure sustainable resource harnessing in the region.

"What we are doing is not 1-2 year business, but long-term business, and mining resources development needs to be conducted in an orderly and well-regulated way," the employee of the company said.

Green and sustainable development of the industry as a whole must comply with national policies, and so supervision is needed, Wu Yanhua, secretary general of Lithium Industry Branch of China Nonferrous Metals Industry Association, told the Global Times on Monday, noting that the suspension is also for the development of the industry.

"The restoration of some mining operations should proceed gradually after investigation," Wu said.

Industry rectification also triggered a sharp rebound in lepidolite prices in the market. A person from Yichun Lithium Power told Yicai.com that Yichun's 0.9-grade lepidolite suddenly rose by more than 300 yuan per ton last Wednesday compared with the previous day.

The rectification of the lithium mining and dressing industry in Yichun has led to the suspension of production of lithium mica mines, which is expected to reduce the global supply of lithium resources in 2023 and accelerate the upstream destocking to drive market sentiment, the CITIC Securities' research report said.

Healthy, sustainable growth
The healthy development of the lithium industry plays a fundamental role in shoring up the NEV industry, which has seen a flourishing trend in recent years, driven by demand, experts said.

The China Passenger Association predicts that based on the annual sales of new energy passenger vehicles of 6.5 million in 2022, it may exceed 8.5 million in 2023, showing a high-speed growth trend. One important reason for the rapid growth of domestic NEV production is that the market has shifted from being policy-driven to being market-driven, backed up by a stable supply chain.

The rapid growth of the NEV industry has driven the prices of lithium resource in the global market to soar. For example, data from 2022 shows that the average prices of battery-grade lithium carbonate in that year rose by more than 300 percent year-on-year.

The soaring prices of lithium resources have promoted the layout of lithium battery upstream and downstream enterprises in Yichun, and the scale of related enterprises has grown by leaps and bounds.

Large enterprises that have deployed lithium businesses in Yichun include Chinese electric vehicle battery giant Contemporary Amperex Technology Co and Jiuling Lithium Industry - both pillars of the booming industry.

There are still quite a few processes in the exploration and development of lithium resources, mechanical mining, processing and transportation and intermediate and final product manufacturing, which still cannot meet the domestic "double carbon" target environmental protection requirements, Chen Jia, an independent international strategy researcher, told Securities Times, calling for a greater focus on the lithium mining process for a sustainable industry development.