Roskill view: Tianqi Lithium recorded a 42% year-on-year (y-o-y) increase in sales revenue in H1 2017 to US$362M. Roughly two-thirds of sales revenue was generated from lithium compounds and the remainder on mineral product sales, and 93% of sales were to the domestic market. Net profit climbed 24% y-o-y to US$140M with gross margin at 69% and net margin at 39%. Tianqi is benefitting from strong demand for lithium carbonate in China, its main product, but also sales of Greenbushes spodumene from Talison Lithium to JV partner Albemarle and the wider Chinese market. Access to Greenbushes spodumene also enables Talison to achieve lower lithium chemical conversion costs, with transfer pricing of US$550/t (US$4,400/t LCE) compared to Ganfeng paying over US$750/t (US$6,000/t).
Ganfeng meanwhile saw Q2 revenue surpass RMB1Bn (US$150M) for the first time, up 60% q-on-q. Gross profit was US$51M, also up 60% on Q1. Ganfeng’s revenue exceeded that of Tianqi after being the smaller of the two producers in revenue terms since Tianqi’s acquisition of Talison in 2014. Ganfeng has stopped buying concentrated lithium brine and will instead use it recently expanded mineral conversion plant to process mineral concentrate from its Mt. Marion JV in Australia. Ganfeng’s 20,000tpy lithium hydroxide plant in Xinyu is due on-line in 2018, ahead of Tianqi’s Kwinana plant in Western Australia.
Completing the “big-5” half-year results round-up, SQM reported revenue from its lithium and derivatives business at US$297M, slightly lower than Tianqi, however Tianqi includes the 49% of revenue attributable to Albemarle (which was likely to have been over US$100M) from their Talison JV, making SQM still the larger but No. 2 behind Albemarle. SQM’s revenues were up 54% compared to H1 2016. Revenues for lithium and derivatives during Q2 2017 were US$151M, up 33% y-on-y but down 3% q-on-q as volume fell by 0.8kt LCE and higher pricing failed to offset it. SQM projects lithium chemical demand to rise by 14% this year (Roskill estimate = 12%) and H2 prices to be higher than H1. Volumes for the year were forecast to remain similar to sales seen during 2016. Gross profit for the lithium division segment accounted for approximately 61% of SQM’s consolidated gross margin for H1 2017, indicating that although lithium and derivatives accounts for 30% of SQM’s H1 revenue, it is its best performing business unit.
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