https://uk.reuters.com/article/us-ganfenglithium-results-idUKKBN1X70VVBEIJING (Reuters) - China’s Ganfeng Lithium (
002466.SZ) (
1772.HK) said on Monday its net profit slumped 86.5% year-on-year in the third quarter as a sharp drop in the value of its financial assets exacerbated a fall in prices for the metal used in electric vehicle batteries.
Ganfeng, one of the world’s top lithium producers which counts automakers Tesla (
TSLA.O) and Volkswagen (
VOWG_p.DE) among its customers, posted net income of 33.38 million yuan ($4.73 million) for July-September, versus a restated figure of 246.84 million yuan in the third quarter of 2018.
The meager profit marked Ganfeng’s worst quarterly result since a loss of 21.4 million yuan in the fourth quarter of 2016, according to Refinitiv Eikon data.
Third-quarter revenues rose 10% year-on-year to 1.39 billion yuan thanks to higher production, even though oversupply has pushed prices for battery chemical lithium carbonate down around 28% year-to-date to 49,500 yuan a tonne in China AM-99C-LTCB. Prices were around 150,000 yuan a tonne in early 2018.
But a 294.5 million yuan loss in fair value, mostly related to the falling prices of equities held by Ganfeng, made a severe dent in the company’s bottom line.
Ganfeng, which has interests in lithium mines in Australia, Argentina, Canada and Mexico, boasts around 70,000 tonnes of lithium carbonate equivalent of annual lithium processing capacity in China.
Its rival Tianqi Lithium Corp (
002466.SZ) last week reported its first net loss in 5-1/2 years, blaming lower lithium prices, higher interest rates and foreign exchange fluctuations.
The poorer quality deposits supplying lesser quality lithium may well be true from various Australian hard rock mines. As you can read above part reason is why PLS has had to lift its game. Another issue is because demand has eased off recently as China's economy has slowed due to trade tariff wars with USA. Car sales globally have come off in the last quarter as well. I think there are a number of factors in play recently which is why I have been bearish on the sector.
https://www.bloomberg.com/news/articles/2019-10-30/china-s-top-electric-carmakers-are-mired-as-subsidy-cuts-bite?BYD just reported a 89% slump in 3rd quarter earnings adds to the major lithium users who are battling tough times right now.
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