Ganfeng signed the lithium production line cooperation agreement with Jiangte Motor and its subsidiaries including wholly-owned subsidiary company Jiangte Mining and Jiangte Mining subsidiary Yichun Yinli New Energy in Xinyu city, Jiangxi province, on August 19.
Ganfeng will be responsible for the production, operation and management of the lithium production lines in Yichun owned by Jiangte Motor and its subsidiaries, receiving all operating income and bearing operating losses. Ganfeng will pay a management fee of 192 million yuan ($27 million) to Jiangte Motor and its subsidiaries during the management period of October 1, 2020 to March 31, 2023.
The production lines have an output capacity of 5,000 tonnes per year of lithium carbonate by using mica, 10,000 tpy of battery-grade and industrial-grade carbonate by using spodumene, 5,000 tpy of hydroxide expanding project, and 10,000 tpy of carbonate project using mica.
Ganfeng said the cooperation agreement will help to bring into full play the company’s existing advantages over lithium resources, and further expand its production scale and market share.
Yichun Yinli suffered a loss in 2019 and in the first half of 2020 due to falling lithium carbonate prices, Jiangte Motor said. The cooperation with Ganfeng Lithium will help to optimize the company’s lithium production lines and improve the profitability of the company.
“The fact Ganfeng is expanding capacity by leasing Jiangte Special Motor’s production lines is an interesting development as it gives Ganfeng the ability to increase production capacity quickly without having to wait for another greenfield project to be built. The fact it wants to do so suggests it is confident that it can apply its know-how to the production lines to make the high quality lithium chemicals that top tier battery manufacturers want. On the one hand, this suggests the company is bullish in the fairly near term outlook for demand, but it should also dispel some of the fears that there will not be enough top quality material around within a few years,” head of base metals and battery research at Fastmarkets William Adams said.
Lithium prices have tracked a steady downward trend since 2019, and the outbreak of the Covid-19 pandemic this year has affected both supply and demand in an already low-priced environment.
Fastmarkets’ weekly price assessment for lithium carbonate, 99.5% Li2CO3 min, battery grade, spot price range exw domestic China was 37,000-41,000 yuan per tonne on August 13, unchanged since July 9 but down from 45,000-51,000 yuan per tonne at the start of 2020 and 75,000-83,000 yuan per tonne at the start of 2019.