China’s Contemporary Amperex Technology Co. Ltd. (CATL) has paused operations for at least three months at its Jianxiawo lithium mine in Jiangxi province. This halt followed the expiration of its mining permit on August 9 and has led to speculation about wider supply cuts as Beijing tackles overcapacity problems. While analysts believe this change won’t significantly affect the market’s current oversupply, there might be a chance for temporary price fluctuations. If other Yichun mines face disruptions after September 30, prices could shift away from “reasonable levels”. Still, Citi analysts don’t expect any lasting supply shortages, even if the suspension briefly boosts market sentiment.

Surge In Australian Lithium Stocks

In Australia, lithium stocks have surged. The Australian benchmark index, the S&P/ASX 200, has reached a new high, exceeding 8852. The stop at CATL’s Jianxiawo mine is a short-lived issue in a market still facing long-term oversupply. This situation seems like a temporary lift in sentiment, not a major change. Traders should see the resulting price swings as a limited-time opportunity. Historically, lithium carbonate prices plummeted from near $80,000 per tonne in late 2022 to below $20,000 for most of 2024, due to an influx of new supply. Prices have steadied around $23,500 per tonne in mid-2025, showing that sentiment can quickly be swayed by market realities. The current production pause is minor compared to the significant global capacity growth over the past two years. In the coming weeks, we think call options on lithium producers and related ETFs are a good strategy. The important date is September 30 when other mining permits in China’s Yichun region are up for review. News of further halts could prolong the rally, making short-term call options expiring in October or November 2025 particularly appealing.

Hedging Against Market Corrections

The rise in Australian stocks like Pilbara Minerals and Arcadium Lithium may be ahead of the actual situation. The S&P/ASX 200 index reaching a record high amid this material rally poses a potential risk. If supply concerns diminish after September, these gains could quickly reverse. Thus, a counter-strategy is necessary. As we enter the fourth quarter, the market will likely refocus on ongoing oversupply issues. We are considering buying put options that expire in early 2026 to prepare for a price correction once this short-term news cycle concludes. Create your live VT Markets account and start trading now.

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