A year after Contemporary Amperex Technology’s flagship lithium mine was first shuttered, speculation over its fate is still driving wild price swings, prompting growing concerns among traders and analysts that volatility in China’s nascent exchange contract is clouding other drivers.

Rumors and unverified reports around the battery giant’s Jianxiawo operation have contributed to a nearly 30% decline in lithium prices since May, as the market frets over the return of a mine that accounts for about 4% of global supply.

But absent an actual full-blown restart, some market participants argue that one eye-catching mine is dominating attention, especially among retail participants, at a time when lithium is benefiting from a surge in demand for battery storage to power fast-expanding artificial intelligence data centers.

“The lithium market is disconnected from what’s truly going on,” said Chris Berry, founder of consultancy House Mountain Partners. “Lithium demand today is arguably stronger than it was in past cycles,” he said, adding that new supply “remains difficult and capital-intensive to bring online.”

Lithium carbonate futures were first traded on the Guangzhou Futures Exchange in 2023, a move seen at the time as an opportunity to bring more transparency to lithium pricing and give producers and buyers more effective ways to hedge risk. That debut helped boost trading activity for CME Group’s lithium futures.

Open interest and trading volume on the Guangzhou bourse, known as GFEX, have surged to a record within the past year. But price swings have repeatedly prompted the bourse to step in to cap new positions or raise trading fees in an effort to rein in volatility.

The most-active lithium contract on the exchange tumbled 9% over two days in June after reports of a preliminary government land assessment notice fueled bets that the mine may reopen. It rose as much as 3% last Friday after local media reported the mine in fact remained shut and was still awaiting environmental approvals.

“Ongoing speculation surrounding the timing and scope of the restarting of mining capabilities has driven some of the most volatile trading days on GFEX, and in turn, CME,” said Anna Chadwick, head of battery metals at commodity brokerage Freight Investor Services. “The real impact of the news on the market should be less dramatic, as much of it has already been priced in. The resultant increase in speculative money flowing into GFEX is giving us a market more influenced by positioning and sentiment than fundamentals.”

GFEX and CATL didn’t immediately respond to requests for comments.

Lithium has endured a difficult few years after a price boom started fading in 2022 when supply surged and electric-vehicle adoption did not advance in line with bullish expectations. Large-scale batteries have since emerged as a new demand driver, changing the picture.

Albemarle Corporation, a major lithium miner, pointed to “off the charts” demand for stationary storage and improved EV sales during an earnings call last week, while Chinese automaker and battery manufacturer BYD has struggled to meet demand for its second-generation “blade” batteries even as it ramps up production.

Supply, meanwhile, remains tight with low inventories among industry players, despite an increase in output from Australia. The market may tighten further after Zimbabwe — which accounts for just under a tenth of mined production — enforces its export ban on lithium concentrate from January 1. “A notable portion of global concentrate supply could be trapped in Zimbabwe,” said Cameron Hughes, analyst at CRU Group.

“CATL is likely to remain the largest battery manufacturer for the foreseeable future, and any such market condition will inescapably yield market power to its largest player,” said YJ Lee, fund manager at 8VantEdge's Arcane Green Metal Fund. “But as the lithium market grows, and similarly the GFEX futures market matures with more global institutional players, the price discovery function of the market should improve.”