Disruptions hit Chinese lithium producers into 2Q

A cyclical decline in prices, ample production and disruptions to logistics and downstream consumption during shutdowns to slow the spread of the coronavirus drove lithium sales lower in the first quarter, Tianqi said.

Argus assessed prices for 99.5pc grade lithium carbonate at 44,000-49,000 yuan/t ($6,214-6,920/t) ex-works China at the end of the quarter, down from Yn48,000-52,000/t at the start of the year and Yn75,000-80,000/t at the end of the first quarter last year.

Tianqi expects to report a net loss of Yn450mn-510mn for the first quarter, down from a net profit of Yn11.1bn in the same quarter last year.

Ganfeng has similarly been affected by a decline in production and sales during the first quarter owing to the shutdown of capacity during the pandemic, along with the decline in lithium salts prices. The company expects its net profit for the first quarter to drop by 96-97pc year on year to Yn7mn-10mn from Yn252.7mn, it said today.

Tianqi expects market conditions to recover somewhat in the second quarter, noting that "with the gradual improvement of the domestic situation, downstream customers have resumed production… and the unfavourable logistics situation has gradually eased". In the longer-term, demand from the consumer electronics battery sector is expected to increase following the rollout of 5G telecom networks.

Most of China's automotive producers have returned to operations for now, China's automotive manufacturers association, CAAM, said. But Western manufacturers remain closed, dampening demand for lithium-ion EV batteries outside China. Some plants in Europe are planning to restart next week, while others are targeting early May.

Lithium producers in Argentina and Chile, which supply the Chinese market, have also been affected. Production in Argentina was suspended last month as the government ordered a nationwide lockdown that has since been extended to 26 April. And Chilean lithium producer SQM's sales to China were reduced by 2,000t during the first quarter.

Lithium demand has been declining for more than a year as China — the world's largest EV market — has been reducing the subsidies it pays to EV producers. It intended to phase out the payments this year but has extended the subsidy scheme until 2022 to support the automotive industry, which has been hit hard by the industrial shutdowns and drop in demand from consumers confined their homes.

Chinese EV production plunged by 56.9pc year on year to 50,000 units in March and by 60.2pc to 105,000 units in the first quarter, CAAM show data. The figures exclude Tesla production. The country's overall automotive production dropped by 44.5pc year on year to 1.42mn in March and by 45.2pc in the first quarter to 3.5mn units.

The accelerated decline comes after annual EV production and sales in China fell for the first time in 2019. Production slid by 2.3pc to 1.24mn units and sales dropped by 4pc to 1.21mn, CAAM data show.

By Nicole Willing