Lithium prices have fallen dramatically over the past 12 months amid weaker demand and improved availability of material.
In the spot market, on a cif China, Japan, and South Korea basis, lithium hydroxide prices have fallen by 83% year on year, while lithium carbonate prices have lost 82% 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 $12.50-14.00 per kg on Wednesday January 31, unchanged from the previous day.
The assessment for lithium carbonate 99.5% Li2CO3 min, battery grade, spot prices cif China, Japan & Korea was at $14.00-14.50 per kg on the same day, also unchanged.
Profit warnings from Ganfeng Lithium Group and Tianqi Lithium Corp
In their respective filings to the Hong Kong Exchange (HKEX), major Chinese lithium producers Ganfeng Lithium Group and Tianqi Lithium Corp both companies warned of significant declines in net profit for the year to December 31, 2023.
Ganfeng expects its net profit for the year to fall between 69.7% and 79.5% year on year to 4.2 billion-6.2 billion yuan ($591-930 million), it said. This compares with profit of 20.5 billion yuan the previous year.
The company attributed the downturn in profits was “due to the cyclical impact of the lithium industry,” adding that “the growth rate of terminal demand slowed down, resulting in a significant decrease of the price of lithium salt products.”
Similarly, Tianqi said its net profits would be 62.9-72.6% lower for the same period at 6.62 billion-8.95 billion yuan, down from 24.1 billion yuan the previous year.
The company had been “affected by the volatility in the lithium chemical product market,” it said in its filing.
These significant drops in the net profits of two of the largest lithium producers globally highlight the weakness in the lithium market.
“The profit warnings and forecast net profit reduction of approximately 70% for both Tianqi and Ganfeng was to be expected considering that Chinese lithium carbonate spot prices fell a similar amount in 2023,” Fastmarkets battery raw materials analyst Jordan Roberts noted.
Reversing trends in the lithium market
Tianqi and Ganfeng are not the only producers to be affected by the current low-price environment.
The world’s largest lithium producer, Albemarle, recently announced that it would look to cut costs and defer spending due to declining lithium prices.
Meanwhile, in the spodumene market, there have been production cuts, declining revenues and cost-cutting reviews while producers adjust to market conditions.
“Where a change from legacy long-term contracts to those referencing spot indices allowed [Ganfeng and Tianqi] to reap the benefit of accelerating lithium chemical prices and languishing concentrate prices in 2022, the reverse was true in 2023, with the salt price downtrend moving faster than concentrate prices, leading to reduced margins,” Roberts said.
But while the declines in 2023 net profits are significant year on year, in the broader context of the lithium market, the profits still show some signs of longer-term strength in the market, Roberts pointed out.
“For Tianqi in particular it should be noted that the forecast 2023 net profit attributable to shareholders is still an increase of at least 212% over 2021, while Ganfeng’s net profit attributable to shareholders is broadly in line with that reported in 2021,” he said.
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