(Yicai Global) Feb. 27 -- A number of lithium beneficiation firms in Yichun have suspended operations after China’s central government sent a team of officials to look into illegal mining in the city known as ‘Asia’s lithium capital,’ Yicai Global learned.

The investigators, drawn from the ministries of natural resources, industry and information technology, and public security, recently arrived in Yichun to determine if companies mined lithium without permits or with expired licenses and guide the healthy development of the city’s lithium industry, local officials and sources at lithium firms told Yicai Global yesterday.

All lithium beneficiation plants in Yichun, a mountainous city in the southeastern province of Jiangxi, are temporarily closed for rectification, while calcination companies have not been affected on a large scale, Yicai Global learned.

Market players expect the suspension to last about a month in a best case scenario, a lithium battery industry analyst told Yicai Global. “If this is the case, the affected production may account for around 10 percent of the global total,” the person said.

Yichun’s monthly lithium carbonate output is about 10,000 tons to 12,000 tons. It has about 2.5 million tons of proven lithium oxide reserves available, with large unexplored areas.

Companies in the lithium battery industrial chain in the Yichun Economic and Technological Development Zone, including the units of Chinese power battery giants Contemporary Amperex Technology, Ganfeng Lithium, and Gotion High-Tech, are operating normally. Production at Nanshi Lithium, located in Yichun’s Wanzai county, is also normal.

This is not the first probe related to Yichun’s lithium industry. Last November, some local lithium carbonate firms halted output because of an environmental investigation of an important river that is the main source of drinking water for residents in the region. Villagers in the area were also previously caught mining lithium ore in the mountains without permission because of surging lithium carbonate prices.

About 60 percent of the factories in Gaoan, a county-level city under Yichun, have halted at least half of their production partially because prices of lithium ore fell, and they do not dare to buy too many raw materials, resulting in a lack of inventory, a source at a local lithium company said.

Battery-grade lithium carbonate prices in China have been declining CNY5,000 to CNY7,000 (USD718 to USD1,005) a day since last November, with the daily drop reaching as much as CNY15,000 (USD2,155). The average price plunged nearly 30 percent from CNY567,500 (USD81,390) a ton in November to CNY399,750 on Feb. 24, when it stopped falling.

Editor: Futura Costaglione