Plummeting lithium price will further dent Ganfeng profits
Oct 15, 2019 10:28 PM ET
- Beijing’s sudden retreat on electric vehicle subsidies in the summer has caused the value of lithium to hit the floor, with disastrous effects on the balance sheets of Chinese companies which had invested big in supply chains to support anticipated huge demand.
Chinese lithium processor Ganfeng Lithium has been forced to issue a profit warning in the face of slumping demand for its products in the world’s biggest electric vehicle market.
With Beijing having slashed public subsidies for electric vehicles since June – in a shock reminiscent of that given to solar project developers a year earlier – demand for lithium has fallen back dramatically.
Xinyu-based Ganfeng today told the Hong Kong Stock Exchange its anticipated net profits for January to the end of September would now be 55-65% lower than it stated in its half-year figures a month ago. The new nine-month profit forecast is now RMB387-498 million ($54.8-70.4 million).
The company blamed a big loss in fair value – the estimated, most up to date value of a product – amounting to RMB175 million on its lithium products, some RMB164 million of which it attributed to a fall in the stock price of its Pilbara investment.
Ganfeng acquired an AU$50 million (RMB239 million/US$33.8 million) slice of Australian lithium producer Pilbara Minerals Ltd in March to secure more lithium raw material spodumene as part of its pre-existing offtaker arrangement.
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