Chinese lithium producers warn of losses amid ‘downturn in the lithium industry’

Lithium prices have fallen dramatically over the past 18 months amid weaker demand and improved availability of material.

In the spot market lithium hydroxide prices on a CIF China, Japan, and South Korea basis have fallen by 73% year on year, while lithium carbonate prices have lost 69% in the same period.

Fastmarkets’ assessment of lithium hydroxide monohydrate LiOH.H2O 56.5% LiOH min, battery grade, spot price cif China, Japan & Korea was at $11.20-12.50 per kg on Thursday, unchanged from the previous day.

The assessment for lithium carbonate 99.5% Li2CO3 min, battery grade, spot prices cif China, Japan & Korea was at $12.50-13.00 per kg on the same day, also unchanged.

In their respective filings to the Hong Kong Exchange (HKEX), both companies warned of net losses for the year to June 30, 2024.

Ganfeng expects its net loss for the six-month period to be 760 million-1.25 billion yuan ($105-172 million), it said. This compares with a profit of 5.9 billion yuan for the same period of 2023.

The company attributed the swing to net losses to “the downturn in the lithium industry,” adding that “the prices of lithium salts and lithium batteries continued to fall, and although the volume of product shipments increased as compared to the corresponding period of last year, the operating results of [Ganfeng] declined significantly.”

Similarly, Tianqi said it expected to swing to losses of 4.8 billion-5.5 billion yuan from profits of 6.5 billion yuan in January-June 2023.

The company had been “affected by the volatility in the lithium product market,” it said in its filing.

Fastmarkets battery raw materials analyst Jordan Roberts said the announcement from Ganfeng and Tianqi is not a surprise, considering declining lithium prices in the first half of 2024, and follows a previous profit warning for full year 2023 results issued in January.

“An unspecified amount of this was also attributable to unfavorable share price declines [for Ganfeng] and issues surrounding the mismatch between pricing mechanisms for raw materials and sales of chemical products [in Tianqi’s case],” Roberts said.

“But the profit warning and a continued narrative of oversupply in the market has done little to deter the appetite for expansion. This week, Ganfeng has started production at a 50,000 tonnes lithium carbonate plant in the Hebei province and another plant with 50,000 tonnes of capacity is due to come online in the fourth quarter of 2024.”

Tianqi and Ganfeng are not the only producers to be affected by the current low-price environment.

Fellow major lithium producer Albemarle reported an 83.5% drop in adjusted earnings before interest, taxes, depreciation and amortization (Ebitda) in the first quarter of 2024, compared with a year earlier.

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