BEIJING – China's lithium mining will likely face disruption as the government steps up scrutiny of a range of problems that have emerged from extracting the metal, experts said on Wednesday.

Yichun, a city in the southern province of Jiangxi, suspended all lithium mining late last week to crack down on criminal activity, such as unlicensed and environmentally damaging mining. 

Though at least some mining has resumed, experts said the government was increasing oversight of a sector that has boomed in recent years as lithium prices soared alongside burgeoning demand for battery-powered electric cars.

"Environmental issues and illegal mining are the prominent problems in Jiangxi, where around one third of domestic lithium resource supply comes from," said Wu Wei, assistant professor at the China New Energy Policy Research Institute of Xiamen University.

"We're likely to see regular inspections to regulate the industry as an effort for China to enhance its self-supply sufficiency of the metal critical in the new energy transition,” Wu said.

Jiangxi has large reserves of lepidolite, a lithium-containing mineral. But the relatively low grade of lithium in it requires heavy extraction, said Wu.

"The mining and processing also pollute water as a result of its byproducts like tantalum and thallium," he said.

Yichun's big miners with valid permits have resumed operations, even as the inspection continues.

"Our production is now normal," an official at Yichun Tantalum Niobium Mine Company Limited, a major lithium miner and processor, told Reuters on Wednesday.

About a third of the area's output is still suspended, however, due to a lack of permits, said a Shanghai-based lithium analyst who declined to be identified because of the sensitivity of the matter.

Yichun's Bureau of Industry and Information Technology could not be reached for comment.

The investigation comes after a sharp decline in lithium prices, triggered by slowing demand for electric vehicles in China. 

Mining in Yichun has boomed in the last two years, growing from a couple of dozen ore selection plants to more than 200, said the analyst, adding that more inspections are likely.