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China’s Ganfeng Lithium (SHE: 002460) finalized a lithium hydroxide supply agreement with the South Korean automotive giant Hyundai Motor Company (KRX: 005380) last week.
The agreement is valid from Jan. 1 this year until the end of 2027. Ganfeng said the price of product sold to Hyundai will be determined by an agreed-upon pricing formula. The company did not disclose any specific dollar figures for the deal or other particular details.
“The annual supply volume will be executed according to the agreement, the actual purchase volume and sales amount shall be subject to the final purchase orders,” Ganfeng said.
This is not the first supply agreement Ganfeng has had with a major vehicle company. The lithium producer signed a long-term supply deal with Bayerische Motoren Werke AG (BMW) (ETR: BMW) in 2020 and another with Tesla (NASDAQ: TSLA) in 2018. Volkswagen (OTC: VWAGY) buys battery materials from Ganfeng as well.
“Entering into this long-term supply agreement can satisfy Hyundai’s demands for key lithium raw materials used for production of batteries on the one hand,” Ganfeng said. “It is conducive to our company for improving its continuous profitability and facilitating its long-term growth on the other hand.”
Lithium hydroxide. Photo credit: Ganfeng Lithium
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Hyundai to rely on China for lithium hydroxide
Ganfeng won’t be Hyundai’s only supplier. The Korea Economic Daily reported that Hyundai signed a lithium hydroxide supply agreement with China’s Chengxin Lithium Group (SHE: 002240) a few weeks ago too. Details of that deal have not been disclosed yet either.
Lithium hydroxide is a fine crystal powder substance that is mainly used to prepare ternary cathode materials for lithium-ion batteries. Ternary cathode materials are typically comprised of lithium, nickel, manganese, cobalt and aluminum.
Bloomberg NEF says the demand for lithium hydroxide is expected to be 10 times higher than it was in 2020 by the end of the decade. Ganfeng is capable of producing about 50,000 tons of it annually.
Ganfeng became China’s first publicly traded lithium supplier in 2010. It claims to be the only company in the industry that has commercial-scale technologies for extracting lithium from brine deposits.
The price of lithium has declined significantly in recent days. Benchmark Mineral Intelligence says it is worth 81 per cent less now than it was a year ago. Its supply is currently exceeding its demand.
rowan@mugglehead.com
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