The Electric: The Rock Inside the Debate Over the Future Price of Lithium

A crackdown on illegal lithium mining and pollution in the Southern Chinese province of Jiangxi, the source of about 10% of the world’s supply of the metal, adds fresh drama to a raging debate in the battery industry and on Wall Street: Is lithium in a decadelong shortage or a surplus?

Last week, Chinese authorities shut down most lithium mining and refining in Jiangxi, where informal mom-and pop-mines work near Volkswagen, China’s Contemporary Amperex Technology Ltd. and other big-name auto and battery companies to feed world lithium and battery demand. This week, officials allowed mines with valid permits to reopen while leaving those without legal papers closed, local media reported Tuesday.

In the short term, supplies of lithium for electric vehicles seem unlikely to be interrupted because local producers have large inventories. But the government action cast a spotlight on Jiangxi, home to among the world’s largest reserves of a purplish, lithium-bearing hard rock called lepidolite.