Tianqi Lithium returns to loss on prolonged battery metal rout
Tianqi Lithium Corp. has recently reported significant financial struggles, marking the first full-year loss since 2020, attributed to volatile lithium prices and escalating geopolitical risks. This commentary delves into the context of these challenges and the broader implications for the lithium market and the electric vehicle (EV) industry.
Financial Snapshot of Tianqi Lithium
In a stark contrast to its previous performance, Tianqi recorded a net loss of 7.9 billion yuan (approximately $1.1 billion) in 2024. This downturn is a considerable shift from the profit of 7.3 billion yuan achieved in the prior year, showcasing the harsh realities of a changing market landscape. The Shenzhen Stock Exchange filing indicates that deteriorating prices, compounded by impairments related to alterations in construction plans, played pivotal roles in this loss.
Despite a year-on-year increase in production and sales volumes for lithium compounds and derivatives, the market was plagued by a notable price drop that affected gross profitability significantly. The consequences can be seen in Tianqi’s stock performance—shares fell by as much as 3.1% in Hong Kong, reaching their lowest point in over a month.
The Deeper Challenges in the Lithium Market
The current situation highlights a broader crisis in the battery metals sector: lithium prices have plummeted nearly 90% since their peak in 2022, largely due to a surplus in supply and a slowdown in demand, particularly in the electric vehicle market. This scenario is causing companies globally to tighten their budgets and curtail production, indicating that Tianqi is not an isolated case but part of a larger trend affecting the industry.
Geopolitical and Economic Implications
Tianqi’s struggles are exacerbated by a rise in trade protectionism as nations recognize the strategic importance of lithium in the global economy. The company noted in its statement that various countries are implementing protective measures like tariffs and subsidies aimed at bolstering domestic industries. Such developments could present significant challenges for Chinese firms in terms of their international investments and operations.
In January, the firm announced the suspension of an expansive refinery project in Western Australia, which represented a preliminary investment of 1.4 billion yuan. The decision was driven by economic viability concerns. However, they expressed intentions to continue operating the initial phase of the Kwinana project while seeking government support.
Impact of Investments and Future Outlook
Tianqi’s financial issues were further aggravated by reduced earnings from its investment in the Chilean lithium producer Sociedad Química y Minera de Chile (SQM). SQM, too, has forecasted a slight decrease in average prices for 2025 while recently reporting a substantial $404 million loss for the year. This trend illustrates that the pressures facing Tianqi are mirrored across the industry, necessitating a reevaluation of strategies to withstand continuing market turbulence.
On an IFRS accounting basis, Tianqi’s reported net loss rises to 8.7 billion yuan when factoring in increased impairment provisioning. As such, this predicament calls for strategic adaptations as the company navigates a future in an unpredictable market.
Conclusion
Tianqi Lithium’s recent losses underscore the volatility plaguing the lithium market, shaped by both economic forces and geopolitical developments. As the company grapples with these challenges, it highlights the need for a robust strategy to adapt to evolving market conditions. As demand for electric vehicles continues to rise, the industry must find a way to reconcile supply and demand dynamics to ensure sustainable growth. The outlook for the lithium sector remains fraught with uncertainty, but adaptability and innovation may provide pathways for recovery and success.
