Tianqi Lithium profits down by 83% on fall in lithium prices

Tianqi Lithium has reported a decrease in profits in the first quarter of 2019 due to lower lithium prices and high interest payments on M&A loans.

Producer Tianqi Lithium has reported a year-on-year fall in net income of 83.14% to 111 million yuan ($16.47 million) and revenue down by 19.89% to 1.337 billion yuan in the first quarter of 2019.

In a financial statement released on Monday April 29, the company said that the lower net income and revenues year-on-year were attributable to lower lithium prices and high interest payments on loans taken to fund merger and acquisition activity (M&A).

Tianqi is currently one of China’s top lithium chemical producers, providing lithium carbonate and hydroxide for the battery industry. Like other lithium producers, it saw lower lithium prices over the course of the first quarter of 2019.

Lithium carbonate and hydroxide prices have fallen over the past year in China, due to a slight oversupply of material alongside a slowdown in consumption of battery-related lithium compounds in Asia. Fastmarkets’ research team expected that the surplus in supply will persist throughout 2019.

Fastmarkets has reported a year-on-year fall in the spot price of battery-grade lithium carbonate (min 99.5% Li2CO3) in China by 47.33%, assessing the price at 70,000-78,000 yuan ($10,388-11,575) per tonne on April 25. This was down from 138,000-143,000 yuan per tonne on April 26 of last year.

The spot price of battery-grade lithium hydroxide monohydrate (min 56.5% LiOH.H2O) in China also fell year-on-year, down by 38.53% to 90,000-95,000 yuan per tonne on April 25, from 148,000-153,000 yuan per tonne on April 26 last year.

High interest payments on M&A loans were associated with the recent purchase of a stake in Chilean lithium producer SQM. Tianqi spent $4.066 billion to acquire a 23.77% stake in the South American company.

Tianqi will raise 7 billion yuan to pay off its loans through the issuing of 343 million shares, the company said, adding that it would keep expanding production capacity.

Demand for lithium products will continue to be driven by the downstream market, Tianqi said, and will remain strong in the long term.

Throughout the first quarter of 2019, Tianqi increased its sales of lithium chemicals by 27.8% year on year.

In 2018, the company produced close to 50,000 tonnes of lithium carbonate equivalent and it expected to increase production to 58,800 tonnes by the end of 2019.

Martim Facada

martim.facada@fastmarkets.com

Published

Martim Facada

May 01, 2019

10:10 GMT

London