Tianqi Warns of $670 Million-Plus Loss Over Lithium Price Plunge...

Tianqi Warns of $670 Million-Plus Loss Over Lithium Price Plunge

By Lu Yuntong and Han Wei

Lithium prices collapsed by more than 80% in 2023 and have continued to fall this year

Chinese lithium giant Tianqi Lithium Corp. (002466.SZ) is forecasting a net loss exceeding $670 million for the first half of the year as plummeting lithium prices hurt the bottom line of producers of this essential battery raw material.

Tianqi said Tuesday that it anticipates a significant net loss of between 4.9 billion yuan and 5.5 billion yuan ($674 million and $756 million) for the six-month period. This includes a projected net loss of between 983 million yuan and 1.6 billion yuan for the second quarter, which is narrower than the 4 billion-yuan loss reported in the first quarter.


Chinese lithium majors sink into red despite EV growth

Tianqi and Ganfeng warn of substantial losses in first half due to falling prices

Brine pools at an SQM lithium mine in northern Chile. China's Tianqi Lithium, a major stakeholder in SQM, is feeling the effects of the lithium price downturn. © Reuters
KENJI KAWASE, Nikkei Asia chief business news correspondentJuly 10, 2024 17:16 JST

HONG KONG -- The rise of China's electric vehicle industry is sending shock waves through the global auto market, but local players producing lithium -- a key ingredient for EV batteries -- are feeling financial pain from depressed prices.

Tianqi Lithium and Ganfeng Lithium, two of the major Chinese producers of the indispensable metal, separately announced Tuesday night that they slipped deep into the red in the first six months of this year.

Tianqi reported that it expects a net loss of between 4.88 billion yuan and 5.53 billion yuan ($670 million and $760 million) for the half, versus a net profit of 6.45 billion yuan for the same period a year earlier. Ganfeng estimated a net loss of between 760 million yuan and 1.25 billion yuan, down from a net profit of 5.85 billion yuan.

Both companies, which are dually listed in Shenzhen and Hong Kong, blamed falling lithium prices.
Tianqi Chairperson Jiang Anqi said in the filing that the company has "witnessed a substantial decline in the sales price of its lithium products compared to the corresponding period of last year, and the gross profit of the lithium products decreased significantly."

Jiang, the daughter of founder Jiang Weiping, who stepped down in April, added that the loss would be "temporary," as there is a "time cycle mismatch" between purchases of raw materials and the sales of products to users including EV makers. She said high-priced inventory of lithium chemical concentrates, procured when market prices were higher, is gradually being digested and the gap with product prices is steadily narrowing.

Ganfeng Chair Li Liangbin said in its filing that both prices of lithium salt and lithium batteries "continued to fall" during the period, "due to the downturn in the lithium industry." The company's operating results "declined significantly" despite an increase in the volume of its lithium products.

Although China's EV market continues to grow, the pace has decelerated in recent years amid weak consumer demand. Globally, the market for lithium faces structural challenges stemming from an influx of new players and chronic oversupply.

Jack Shang, a Hong Kong-based analyst for Citi who closely monitors the industry, said in a note on Monday that the "lithium market remains weak even though downstream battery demand is improving."

"We are yet to see de-stocking kick off in the lithium space," Shang said, citing weekly data. The latest average selling prices of lithium carbonate and lithium hydroxide quoted on Friday had inched downward by around 1% each from the week before.
A production line for lithium-ion batteries for electric vehicles at a factory in Huzhou, China. © Reuters

The Chinese companies Tianqi and Ganfeng both cited pressures on their overseas investments as factors behind their sharp earnings deterioration.

In compiling its earnings preview, Tianqi said it made its own assessment of the first-half results of Sociedad Quimica y Minera de Chile, or SQM, a Chilean peer listed on the New York Stock Exchange.

According to SQM's latest annual report, Tianqi is the second-largest shareholder, owning 22.16%, after Chile's Pampa Group with 25.76%. Tianqi said it determined that its investment income from SQM is likely to "decrease significantly compared with the corresponding period of last year," based on "a thorough consideration of all the reliable information available," including an earnings forecast by Bloomberg and an extra $1.1 billion in income tax charges accrued based on an April ruling by Chilean tax authorities.

SQM is set to publish its results for the second quarter on Aug. 20.

For Ganfeng, the falling value of its investment in Pilbara Minerals, listed on the Australia Stock Exchange, affected its bottom line. During the six months, Pilbara's share price fell over 20%, which resulted "in a significant fair value loss" for Ganfeng, which holds 5.74%, according to its annual report published at the end of March.

In another disappointing earnings preview for an EV-related materials company, Zhejiang Huayou Cobalt announced late Tuesday that its first-half net profit dropped between 14% and 28% from the same period a year earlier, to between 1.5 billion yuan and 1.8 billion yuan. The Shanghai-listed company attributed the fall mainly to a "substantial drop in major metal prices, namely nickel and lithium, which impacted the earnings capabilities of the company's products."

Based on its latest full-year annual report published in April, and despite its name, the company's largest metal product is nickel -- another key ingredient in EV batteries.

Huayou stressed in its Tuesday filing that the second-quarter result was better than the first, as production at its nickel mining project gradually reached its targets.