China’s lithium producers face financial problems

China’s electric vehicle (EV) industry may be surging, but the companies that mine the lithium powering those batteries are facing a financial squeeze.

Tianqi Lithium and Ganfeng Lithium, two of China’s biggest lithium producers, reported significant losses in the first half of 2024, a stark contrast to their profits a year earlier.

Tianqi expects a net loss between 4.88 billion yuan and 5.53 billion yuan ($670 million and $760 million) for the first half, compared to a net profit of 6.45 billion yuan in the same period of 2023.

Ganfeng estimated a net loss between 760 million yuan and 1.25 billion yuan, down from a net profit of 5.85 billion yuan in the first half of 2023.

Both companies blamed the losses on falling lithium prices. Tianqi attributed the decline to a “substantial decline in the sales price” of lithium products compared to last year, leading to a significant drop in gross profit.

Tianqi Chair Jiang Anqi sees the losses as temporary, attributing them to a mismatch in the timing of raw material purchases and product sales. She anticipates that the high-priced lithium inventory will be used up soon, aligning with current product prices.

Ganfeng Chair Li Liangbin highlighted a downturn in the lithium industry, leading to a drop in lithium salt and battery prices. Despite higher production, the company’s operating results saw a significant decline.

China’s EV market growth has slowed due to weak consumer demand, while the global lithium market is challenged by new players and oversupply.

Analyst Jack Shang from Citi noted that the “lithium market remains weak even though downstream battery demand is improving.” He added that de-stocking, a key indicator of market recovery, hasn’t begun yet.

Both Tianqi and Ganfeng cited pressure on overseas investments as contributing to their losses.

Attribution: The Nikkei Asia