Lithium prices are hard to return to their "peak," and lithium companies' performance awaits a turnaround

Recently, multiple lithium salt companies, including TIANQI LITHIUM and Ganfeng Lithium, have successively released their third-quarter reports. Overall, many lithium companies have been in a loss state during the industry's downturn in the first three quarters of this year. Industry insiders analyze that although lithium prices are unlikely to return to their "peak," the future downside space is limited. As the supply-demand relationship gradually balances, the performance of lithium companies is expected to improve. At the same time, in the absence of significant market recovery, companies need to further reduce costs through measures such as increasing the self-sufficiency rate of mineral resources to enhance their risk resistance.

Lithium Price Fluctuations Pressure Performance

Financial report data shows that the performance of lithium companies has generally been under pressure in the first three quarters of this year. Among them, TIANQI LITHIUM reported a net profit loss attributable to shareholders of 5.701 billion yuan, compared to a profit of 8.099 billion yuan in the same period last year; Ganfeng Lithium reported a net profit loss attributable to shareholders of 640 million yuan, compared to a profit of 6.01 billion yuan in the same period last year; Shengxin Lithium Energy reported a net profit loss attributable to shareholders of 462 million yuan, compared to a profit of 1.095 billion yuan in the same period last year.

Some lithium companies, such as Salt Lake Industry, Zhongkuang Resources, and Rongjie Co., Ltd., reported profits in the first three quarters, but showed varying degrees of decline compared to the same period last year. Among them, Salt Lake Industry reported a net profit attributable to shareholders of 3.141 billion yuan in the first three quarters, a year-on-year decrease of 43.91%; Zhongkuang Resources reported a net profit attributable to shareholders of 546 million yuan, a year-on-year decrease of 73.64%; Rongjie Co., Ltd. reported a net profit attributable to shareholders of 183 million yuan, a year-on-year decrease of 48.94%.

The fluctuations in lithium prices are an important factor affecting the performance of lithium companies. Salt Lake Industry mentioned that the decline in market prices of lithium carbonate and potassium chloride products led to a decrease in revenue; Shengxin Lithium Energy stated that due to the continued downturn in the lithium battery new energy industry, the price of lithium salt products decreased significantly compared to the same period last year, resulting in a decline in the company's operating revenue compared to the same period last year.

TIANQI LITHIUM stated that the decline in performance was mainly due to the significant decrease in the average sales price and gross profit of lithium products compared to the same period last year. At the same time, according to Bloomberg's estimates, the performance of the company's joint venture SQM is expected to decline significantly year-on-year in the third quarter of this year, and the investment income confirmed by the company from this joint venture has also decreased significantly year-on-year. Additionally, TIANQI LITHIUM indicated that due to the mismatch in the pricing mechanism of chemical-grade lithium concentrate of its subsidiary Talison Lithium Pty Ltd and the pricing mechanism of its lithium chemical product sales, the company experienced a temporary loss in operating performance during this reporting period.

Supply and Demand Expected to Improve

In recent years, due to supply-demand imbalance, the price of lithium carbonate has experienced "roller coaster" fluctuations, dropping sharply after reaching a peak of 600,000 yuan/ton in November 2022, and even touching 70,000 yuan/ton earlier this year. Data released by Shanghai Steel Union shows that on November 6, the average price of battery-grade lithium carbonate was reported at 75,500 yuan/ton.

When the performance of lithium companies will improve mainly depends on the future trend of lithium salt prices. Industry analysis indicates that although there are cyclical price fluctuation risks for lithium prices, the downside space is already limited. The main reason for the weakness in lithium prices is the rapid growth in supply in the earlier stage. In the future, as market inventory is gradually digested and high-cost production capacity is phased out, the "bottoming" situation of lithium prices is expected to improve A battery industry insider told China Energy News that the long-term growth of lithium resource demand cannot be ignored. Driven by the growth of new energy vehicles and lithium battery energy storage, it is expected that global lithium resource demand will increase by more than 200% by 2030 compared to 2023.

Industry insiders believe that as the market supply and demand relationship gradually balances in the future, lithium prices are expected to stabilize and rebound, providing a better market environment for the development of related enterprises.

"The peak period of supply-side capacity release has ended. According to incomplete statistics, there are currently no large projects with clear production plans starting from the second half of 2025. On the demand side, new energy vehicles and energy storage are expected to maintain a high growth rate, and the oversupply situation may significantly improve in 2026," said Zhang Weixin, a non-ferrous metals analyst at CITIC Jiantou Futures, in an interview with China Energy News. "We judge that lithium carbonate has generally reached the bottom of the cycle and is expected to operate in the bottom area for another six months to a year, entering a price recovery cycle in 2026."

Enhancing Risk Resistance

Overall, in the context of the supply-demand imbalance of lithium carbonate, the main task of the industry is to clear excess capacity, that is, to digest some high-cost projects to achieve a new supply-demand balance. For lithium companies currently in the industry downturn cycle, enhancing risk resistance is also crucial.

Currently, many lithium companies are actively reducing costs through optimizing production processes, strengthening upstream and downstream linkages, and improving resource self-sufficiency to enhance their ability to cope with market price fluctuations and improve competitiveness. Notably, Shengxin Lithium Energy announced in October that the company signed a "Lithium Product Cooperation Framework Agreement" with Zhongchuang Xinhang and Huirong Mining. According to the agreement, Zhongchuang Xinhang will lock in the company's lithium salt supply in advance, and the company will supply according to Zhongchuang Xinhang's requirements. Huirong Mining will provide raw material guarantees for lithium concentrate to support the company's cooperation with Zhongchuang Xinhang.

Shengxin Lithium Energy mentioned that the company is actively expanding and consolidating high-quality downstream customers and is seeking quality lithium ore resources globally to ensure production needs. To ensure delivery arrangements for downstream customers, the company plans to purchase lithium ore from Huirong Mining according to the framework agreement. This business cooperation is beneficial for the expansion of the company's lithium salt business, strengthening the long-term stable partnership with high-quality customers, and enhancing the stability and sustainability of the company's future operations. The implementation of the agreement is expected to have a positive impact on the company's future operating performance.

Additionally, some analysts point out that while lithium companies strengthen investment in lithium resource development at the front end, they should also actively promote hedging business at the back end, improving the application strategies of various hedging tools to achieve front-back matching, effectively avoiding market price fluctuations while ensuring front-end development and production activities, ultimately achieving stable supply and enhancing the ability to resist market volatility risks.

"For bulk resource companies, futures are a good risk management tool. For resource companies, the costs of mining lithium ore and producing lithium salt are relatively certain, while the uncertainty lies in the sales side, especially price fluctuations. By using futures tools, companies can lock in sales prices in advance to avoid price fluctuations. This year, a few companies have already carried out large-scale hedging of lithium carbonate futures and successfully avoided the pressure of price declines, achieving higher sales prices "Zhang Weixin pointed out.

Article author: Yao Meijiao, source: China Energy News, original title: "Lithium prices are hard to return to the 'peak', lithium companies' performance awaits reversal"