Undeterred by falling profits, China's lithium giants are planning to grab a bigger share of the market.
Tianqi Lithium Corp. and Ganfeng Lithium Group Co. last week reported a sharp drop in their 2023 net profit after prices plunged more than 80 percent the previous year. Both companies said they would continue to acquire stockpiles of this key battery material around the world and increase production capacity as larger companies look to the prospect of growing demand in the coming years.
Improving supply prospects and slowing demand growth for electric vehicles have forced companies from Australia to the United States to rein in production and spending. But Chinese companies are bucking the trend.
Tianqi is looking for partners to explore high-quality lithium resources and will accelerate its mining and processing project in Yajiang, Sichuan Province, according to the company's earnings report. Ganfeng's expansion plans include "gradually collecting and developing" low-cost resources such as lithium extracted from brine, as well as adding processing facilities in China and Argentina.
Their bullish comments echo those of CMOC Group Ltd. and Zijin Mining Group Co. The sentiment is echoed by other Chinese mining companies. With signs that the price of battery materials may recover, the two companies are eyeing merger and acquisition opportunities in the battery materials sector.
As the global energy transition gathers pace, the long-term demand outlook for lithium remains positive for those companies that can weather the boom-and-bust cycle. Anz Banking Group Holdings LTD said in a report last week that battery metal supply needs to grow 3.5 times over the next five years, "a target that will not be easy to achieve."
That could herald a shakeout in the industry, and Chinese companies will be eager to get ahead of it.
"The industry is likely to see consolidation as low-cost producers seeking to increase market share merge with higher-cost producers in financial trouble," said BloombergNEF.
