China’s largest supplier of lithium-ion new energy core materials, Tianqi Lithium Industry, announced on the evening of April 23 that the company is expecting a net loss of 3.6 billion to 4.3 billion yuan in the first quarter of 2024. Behind Tianqi Lithium Industry’s poor performance lies the decline in lithium carbonate prices and its joint venture company’s challenges in Chile due to issues concerning “public-private partnerships”.
The company forecasted a significant increase in net losses in the first quarter of 2024 compared to the profit of 4.875 billion yuan in the same period of the previous year. Tianqi Lithium Industry reported a net loss of 801 million yuan in the fourth quarter of 2023, which further widened in the first quarter of this year.
The company attributed the first-quarter performance decline to the impact of fluctuating lithium product markets, leading to a substantial decrease in lithium product sales prices and gross profit compared to the same period last year. Additionally, their important joint venture company, SQM, is expected to experience a significant drop in performance in the first quarter, leading to a substantial decline in investment income from this joint venture compared to the previous year.
The sudden poor performance by the lithium mining giant has raised concerns among many investors. Tianqi Lithium Industry closed down by 1.85% on the 23rd, at 45.14 yuan per share, with a total market value of 71.9 billion yuan.
In late hours on April 23, the Listing Department of the Shenzhen Stock Exchange issued a letter of concern to Tianqi Lithium Industry, requesting specific information on the changes in the company’s main business operations, product sales volume, product prices, raw material procurement prices, costs, impairments, and factors contributing to the significant increase in losses in the first quarter of 2024 compared to the fourth quarter of 2023.
According to reports from First Financial and Securities China, Tianqi Lithium Industry incurred losses for two consecutive years in 2019 and 2020, with accumulated losses surpassing 7.8 billion yuan. From 2021 to 2023, the company began to turn a profit.
As disclosed in the company’s annual report at the end of March, the net profit attributable to shareholders of listed companies in 2023 was 7.297 billion yuan, a 69.75% decrease from the previous year.
Following the release of these financial reports, Guosen Securities and Huafu Securities both revised their profit forecasts for Tianqi Lithium Industry further downward due to significant fluctuations in lithium prices.
Guosen Securities stated that lithium prices are expected to be at a bottoming stage in 2024. They mentioned that global demand for new energy vehicles slowed down in 2023, especially in the Chinese market, which led to a deceleration in lithium salt demand.
Since the beginning of this year, lithium carbonate prices have remained at a low level, fluctuating around 100,000 yuan per ton in futures prices.
In addition to the direct correlation with lithium carbonate prices, Tianqi Lithium Industry’s performance is also influenced by the operational status of its joint venture company, SQM.
In December 2018, Tianqi Lithium Industry acquired a 23.77% stake in the Chilean lithium mining company SQM for 4.1 billion US dollars. SQM operates the largest lithium salt lake project globally in the Atacama region. The acquisition was approved by Chile’s anti-monopoly court but restricted Tianqi Group from obtaining SQM’s trade secrets. Regulatory agencies, competitors, and consumer groups raised concerns that the deal could potentially lead to Tianqi Lithium Industry nearly monopolizing the global lithium market.
On December 27, 2023, SQM and Chile’s state-owned National Copper Corporation (Codelco) jointly announced the formation of a government-controlled joint venture to develop lithium mining resources. SQM’s lithium business would be separated into a joint venture with Codelco, with the latter holding a majority stake of 50% plus one share. If the transaction proceeds, Tianqi’s stake in the lithium joint venture would be diluted, limiting its influence on the company.
Regarding the issue of “public-private partnerships” at SQM, Tianqi Lithium Industry noted that they are monitoring recent announcements made by their joint venture company SQM, and the specific details should be referred to SQM’s own announcements.