Lithium: Ganfeng first of the majors to see price impact as Q3 earnings emerge

Ganfeng Lithium reported Q3 revenue of RMB1.26Bn (US$176M), up 3% from RMB1.22Bn (US$170M) in Q2 as lower prices offset increased volumes (Roskill estimates 10.4kt LCE vs. 9.2kt LCE in Q2). Higher costs also ate into profits, down 33% from RMB463M (US$61M) to RMB312M (US$44M) due to increased operating expenditure and Hong Kong listing expenses. Ganfeng’s H-Shares were officially listed on the HKSE on 11th October rasing US$421M, with LG Chem taking an 11% share alongside an off-take agreement for 92.6kt LCE of lithium hydroxide. Ganfeng also recently signed off-take agreements with Tesla and BMW as automakers lock-in lithium supply.

Ganfeng’s inventory swelled to RMB1.4Bn (US$200M) as the company stockpiled spodumene ahead of full operation of the new 17.5ktpy lithium carbonate and 20ktpy lithium hydroxide plants which are now being ramped-up, with another plant planned with the proceeds of the IPO. Ganfeng has also committed more funds to the Minera Exar Cauchari joint venture project with Lithium Americas in Argentina, paying US$87.5M (plus an additional deferred payment of US$50M) to SQM and now holding 37.5% of the project. As well as its own share of the project costs, Ganfeng is also funding an additional US$100M of Lithium Americas’ obligation to the capital costs, alongside US$125M commited previousely, and will receive 70% of Lithium Americas’ share of output. In total, Ganfeng’s share of output from the 25ktpy project will be 20.3kt, with Bangchak Petroleum taking 2.4kt following its US$113M investment in 2017.

Roskill View: Ganfeng is busily expanding capacity in China, as demand for mineral-derived battery-grade hydroxide and carbonate keeps growing, with its Mt. Marion joint venture and Pilbara off-take feeding its new conversion plants. The speed at which Ganfeng ramps-up output will be key both to its, and the lithium industry’s, performance in 2019. With South American brine expansion lagging expectations, all eyes are on Chinese converters to fulfil demand, and cell makers and OEMs are buying into it. Delays to expansion and on-going production issues at SQM, Albemarle and Orocobre, however, throw into question Ganfeng’s Cauchari brine investment, a project which could become a thorn in an otherwise rosy picture for this fast-growing lithium producer. Much has been made of Ganfeng’s technical capability in brine processing winning through where others have struggled, yet it has never operated a pond-to-product operation at >4,000m in the Puna.

Roskill’s Lithium: Global Industry, Markets & Outlook report was published in June 2018. Click here for more information or to download the brochure or sample pages.

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