Tianqi: Lithium Demand is Solid, Prices to Stabilize

The lithium market is on track to healthy sustainable growth as lithium prices stabilize after months of volatility, said Tianqi Lithium (SZSE:002466) President Vivian Wu on Monday (June 10).

The leader of the Chinese lithium giant said that last year Chinese lithium spot prices decreased significantly, with new supply coming online and the transition to higher nickel cathodes being the main factors impacting prices.

“But even looking at the lowest price last year, it was a lot higher than the historical price for lithium,” Wu told reporters ahead of the Lithium Supply & Markets Conference in Santiago. “That means the new demand is solid, the industry is just taking the time to adapt itself to the new sustainable growth.”

The president of the top lithium-producing company believes prices have now stabilized.

“(Prices) will not go back to the crazy peak seen in the past few years … They will stay at a place where strong players like Tianqi grow, but will be challenging for a lot of new greenfield projects,” Wu said.

Transparency in lithium prices has been a main topic of discussion this week in the lithium space after the London Metal Exchange (LME) announced it has decided to join forces with pricing agency Fastmarkets to launch its planned lithium futures contract.

For Tianqi’s Wu, the LME contract will help reduce lithium price volatility.

“It will give a real chance (for all players) to get a better understanding of the market,” she said, adding that it will also help people make better investment decisions.

Last year, Tianqi increased its interest in SQM (NYSE:SQM), acquiring a 23.77 percent stake in the firm for US$4.07 billion.

The initial excitement about the minority stake purchase was dampened when it was revealed that the acquisition would be investigated by Chilean competition watchdog FNE. The purchase went through in December 2018.

The company also faced some pushback from SQM’s biggest shareholder, Pampa Group, finally reaching an agreement with the Julio Ponce-led group over the governance of Chile’s SQM in April.

The relationship has come a long way in the past six months, with Wu saying Tianqi is still trying to understand the business better and find a better way to help.

As prices continue to stabilize, Tianqi will watch the global market, but the company will not be making any new acquisitions in the short term after the big SQM transaction.

Aside from its stake in SQM, Tianqi currently owns a 51 percent stake in Talison Lithium, which runs Australia’s largest lithium mine, Greenbushes, with top producer Albemarle (NYSE:ALB) owning the remaining 49 percent. In China, the company holds interests in the Cuola mine.

The company also operates three chemical plants in the Chinese provinces of Jiangsu and Sichuan and the municipality of Chongqing. Two new facilities in Suining, Sichuan and Kwinana, Western Australia are currently under construction.

Wu also shared her thoughts on the adoption of higher nickel cathodes and what she expects to see in terms of demand for lithium hydroxide and carbonate, both used in lithium-ion batteries.

“Lithium hydroxide has picked up quite a lot, with the main driver being electric vehicles … but we think lithium carbonate will still account for a big portion if not the majority (of demand) going forward.”

Speaking about next-generation batteries, Wu explained why Tianqi has backed two startup companies developing solid-state batteries, WeLion and SolidEnergy.

“That technology is still evolving with different approaches. We don’t know which one will win in the next decade, but we do believe it will become the future,” said Wu, who explained that the lithium metal used in these batteries is lighter, higher density and safer.

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Securities Disclosure: I, Priscila Barrera, currently hold no direct investment interest in any company mentioned in this article.