Lithium: Tianqi posts 14% increase in 2018 revenue and signs hydroxide LTAs with SKI and EcoPro

Tianqi Lithium

Tianqi Lithium posted a 14.16% increase in 2018 revenue to RMB6.24Bn (US$936M) with overseas sales exceeding RMB1.0Bn (US$159M) for the first time. EBITDA at RMB4.06Bn (US$609M) and net profit at RMB2.2Bn (US$330M) represented 6.2% and 2.6% increases over 2018 respectively, with lower prices in H2 and expenses resulting from the Hong Kong IPO (which remains on-hold) likely weighing on net profit margin which fell from 40% to 35%.

Spodumene production at the company’s 51%-owned subsidiary Talison Lithium in Australia was 724,000t (107kt LCE assuming 6.0% Li2O grade), up 12% year-on-year, while refined lithium chemical output at its wholly-owned Shehong and Zhangjiagang plants was 39,600t, up 23%. Talison shipped 8% less concentrate than output suggesting some stock-building ahead of Kwinana commissioning.

Commissioning of the first 24,000tpy train at Tianqi’s new lithium hydroxide plant at Kwinana in Western Australia is on-going, but the company signed long-term supply agreements (LTAs) last week with South Korean battery maker SK Innovation and cathode producer EcoPro for up to 20-25% of annual capacity from Kwinana starting July 1st 2019, with delivered volumes and prices to be negotiated. Tianqi also signed a MoU with SKI to discuss the opportunity for cooperation in the global electric vehicle and battery supply chain.

Roskill view: 

Tianqi is the second-largest lithium producer by revenue, behind Albemarle, although as revenue includes 100% of Talison output with the joint venture’s profit paid back to Albemarle, Tianqi’s revenue on an attributable basis could be closer to US$800M. That is still ahead of domestic rival Ganfeng at US$750M and SQM at US$735M, but adding Tianqi’s 26% equity share of SQM’s lithium business would take its attributable 2018 lithium revenue closer to US$1Bn.

SKI follows South Korean competitor LG Chem into locking-in lithium hydroxide supply, with the latter having signed off-take agreements with Nemaska and Kidman in 2018, although supply from Tianqi arguably carries lower risk as Covalent (Kidman’s JV with SQM) is not likely to start producing until 2022 at the earliest and Nemaska is currently trying to raise additional capital to continue construction of its Shawinigan plant in Canada which is due to start production in 2021.

To discuss the lithium market with Roskill, contact David Merriman: merriman@roskill.com or Robert Baylis: robert@roskill.com