Top China lithium firms look past profit slump and vow expansion

Tianqi Lithium Corp. and Ganfeng Lithium Group Co. reported sharp drops in 2023 net income last week after prices plunged more than 80% over the year. Both said they’ll continue to acquire global reserves of the key battery material and increase production capacity, as bigger firms look beyond near-term weakness to the promise of rising demand in the years to come.

Improved supply prospects and slowing demand growth from electric vehicles have forced a number of companies from Australia to the US to rein in output and spending. But Chinese firms are bucking that trend.

Tianqi is looking for partners to explore high-quality lithium sources, and will accelerate work at its Yajiang mining and processing project in Sichuan province, according to its earnings report. Ganfeng’s expansion includes plans to “gradually collect and develop” low-cost resources such as lithium derived from brine, as well as ramping up processing facilities in China and Argentina.

Their upbeat comments echo Chinese miners like CMOC Group Ltd. and Zijin Mining Group Co, which are eyeing M&A opportunities in battery materials just as signs of a potential price recovery emerge.

As the global energy transition gathers pace, the longer-term demand outlook for lithium remains rosy for those that can weather the boom-and-bust cycle. Battery metals supply needs to rise by as much as 3.5 times over the next five years, “a goal not easily achieved,” ANZ Group Holdings Ltd. said in a note last week.

That could herald a shakeout in the sector that Chinese firms will be keen to get ahead of.

“There is likely to be a consolidation in the industry as low-cost producers seeking to increase their market share merge and integrate with the high-cost producers struggling financially,” said BloombergNEF.