Aug 11 (Reuters) - Shares of lithium producers surged on Monday after Chinese battery giant Contemporary Amperex Technology (CATL) (300750.SZ) , opens new tab halting output at a major mine raised hopes it would erode the oversupply in a market grappling with soft demand.

During morning trade, Albemarle Corp (ALB.N) , opens new tab jumped 10.2%, while Chile's Sociedad Quimica y Minera (SQMA.SN) , opens new tab, rose 9.2% and Lithium Americas (LAC.TO) , opens new tab, gained 2.4%.

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Smaller companies, Standard Lithium (SLI.V) , opens new tab, , Piedmont Lithium (PLL.O) , opens new tab and Sigma Lithium (SGML.V) , opens new tab, advanced between 6.2% and 19.6%. Chinese and Australian miners also rallied.

The lithium sector has been struggling with a glut following weaker-than-anticipated growth in demand for electric vehicles.

The most active lithium carbonate futures in Guangzhou rose the 8% daily limit after CATL said its mining license for the Yichun project in Jiangxi province expired on Aug. 9 and renewal was underway.

The site can produce more than 46,000 metric tons of lithium carbonate equivalent a year, roughly 3% of the global supply forecast for 2025, according to data from the Australian government.

Morgan Stanley analysts said the outage could erode the small 60,000-tonne surplus it expects for 2025, bringing "upside risk to lithium prices in the short term" and potentially moving the market closer to balance if other disruptions follow.

Longer-term, they expect a surplus to re-emerge without further supply discipline.

Morningstar analyst Vincent Sun said the suspension was "an indication that the industry is taking proactive steps to contain further lithium price falls observed year-to-date."

With lithium prices now below the marginal cost of production, the move could be perceived as a positive driver to limit supply growth and rebalance the market, he said, but added it was "still too early to confirm a price recovery trend for the rest of the year."

https://www.reuters.com/world/china/lithium-stocks-rally-catl-mine-halt-raises-prospects-tighter-supply-2025-08-11/