Lithium miners, NEV makers forge win-win tie-ups

Upstream lithium suppliers in China are seeking closer partnerships with downstream new energy vehicle or NEV manufacturers amid market fluctuations.

This, market experts said, will help lithium suppliers to secure long-term customers and provide NEV makers with stable raw material supplies.

On Wednesday, China's Tianqi Lithium Corp, a lithium miner, signed an agreement with Singapore's smart Mobility Pte Ltd, an NEV maker, to invest $150 million in the latter.

Tianqi said it expects to explore new business opportunities through such tie-ups against the backdrop of NEVs increasing their share of the automobile market.

Prior to the Tianqi deal, smart Mobility had two major shareholders: Mercedes-Benz, a German carmaker, and Sunrise Mobility Ltd, a subsidiary of Zhejiang Geely Holding Group, a carmaker in China.

Similar investments were made by another major lithium industry player, Ganfeng Lithium, which invested in NEV makers GAC AION and Voyah in the past two years.

"The (investment) trend is a response to declining profitability of lithium companies, driven by factors such as the decreasing price of industrial-grade lithium carbonate, slowing demand growth in the NEV sector, and inventory adjustments throughout the supply chain," said Lin Boqiang, head of the China Institute for Studies in Energy Policy at Xiamen University.

Although NEV-related demand growth is slowing now in the current cycle, future prospects are bright given the rising share of NEVs in the overall automobile market, experts said.

Tianqi's first-half profit dropped 37.5 percent year-on-year to 6.45 billion yuan ($886.5 million), while that of Ganfeng Lithium declined 19 percent to 5.85 billion yuan.

According to data service provider Wind Information Co Ltd, among the 95 listed lithium companies that published first-half results so far, 64 saw year-on-year profit declines. Among them, 16 saw over 100 percent drops in profit, with the steepest fall exceeding 1,000 percent.

Experts said an important reason behind the slowing market was price turbulence of lithium salts, which reached nearly 600,000 yuan per metric ton in November last year but fell below 200,000 yuan per ton in April.

"The tie-ups between lithium miners and NEV makers also help the latter secure raw materials through stable supplies at relatively reasonable prices," said Chen Jianhua, senior program officer of the Transportation Program at the Energy Foundation China.

Lin said NEV manufacturers are aware that while lithium resources are abundant, the mining and production of lithium carbonate and other lithium salts typically require a 5-8 year cycle. This often leads to supply-demand mismatches. Therefore, partnerships with lithium mining companies will benefit NEV makers by way of stable and reliable supply of raw materials.

Chen said, "The goal is to achieve win-win results and sustainable development of the industry."