The ins and outs of China’s lithium industry

By Albert Li
Published: Thursday, 27 April 2017

Chinese lithium demand is ballooning on the back of steep rises in demand from the electric vehicle and battery sectors, but despite having rich domestic lithium reserves, the country continues to rely heavily on imports and is worried about where future supply will come from, Albert Li, IM Correspondent, writes.

Chinese imports of lithium carbonate have increased by 59.3% in the last four years, from 13,681 tonnes in 2013 to 21,794 tonnes in 2016. In February 2017, imports reached a multi-year monthly peak of 2,632 tonnes (see Figure 1).

Average import prices have also risen sharply, increasing 72% from $5,019/tonne in 2013 to $8,634/tonne in 2016. In February, average import prices stood at $9,935/tonne, although this was down from a peak of $11,200/tonne reached in October last year.  

Figure 1: Chinese lithium carbonate imports January 2013-February 2017 
Source: China Customs  

Chile and Argentina together accounted for 99.3% of China’s lithium carbonate imports in 2015, a share which declined to 89.2% last year as new supply became available elsewhere (see Figure 2). But in volume terms, both countries still exported more lithium carbonate to China than they did the year before, with volumes from Chile increasing by 65.9% year-on-year (y-o-y) while those from Argentina shot up by 119.9% compared 
with 2015.

Figure 2: Chinese lithium carbonate imports by country January 2015-February 2017 
Source: China Customs 

As a major consumer of the chemical, China exports very little lithium carbonate, despite having its own production (see Figure 3). Exports last year were just 1,379 tonnes, although this was down from 2,463 tonnes in 2014 when China’s own lithium consumption was relatively weak. 

Average prices for Chinese lithium carbonate exports have surged by 186.5% from $7,423/tonne in 2013 to $21,267/tonne last year, but this overall trend masks volatility in the mineral’s price, which rose 161.1% from 2015 to 2016, peaking last June, since when it has slowly adjusted downward.

China’s lithium carbonate production meanwhile has been on a steep upward trajectory, rising from 38,000 tonnes in 2013 to 53,400 tonnes in 2016, according to data from the China Nonferrous Metals Industry Association.

Figure 3: Chinese lithium carbonate exports January 2013-February 2017 
Source: China Customs 

Chinese lithium production

Sichuan province, where Sichuan Tianqi Lithium Industries Inc. and several other Chinese lithium producers are based, accounted for 52% of China’s total lithium exports in 2016 (see Figure 4).

Japan received the largest share of Chinese lithium last year, at 62.65% of total exports. But lithium production and exports from other parts of China are now on the up. In July last year, lithium exports from Jiangsu province, where Tianqi and Australia-based Galaxy Resources Ltd both have processing plants, jumped to 215 tonnes with an average price $20,224/tonne.

Figure 4: Lithium carbonate exports from Sichuan Province Jan 15-Feb 17 
Source: China Customs 

Figure 5: Chinese lithium carbonate exports to Japan Jan 2015-Feb 2017 
Source: China Customs  

Lithium hydroxide

China has traditionally been a net exporter of lithium hydroxide, with outbound shipments of 9,834 tonnes in 2016 (see Figure 6). The average price of Chinese lithium hydroxide exports doubled from $7,027/tonne in 2014 to $14,053/tonne in 2016, peaking at $19,770/tonne last July.

Japan and South Korea together received 62.8% of China’s lithium hydroxide exports in 2016 and their import volumes rose by 23.1% and 59% y-o-y, respectively. 

Figure 6: Chinese lithium hydroxide exports 2014-17 
Source: China Customs  

China’s lithium producers

Tianqi Lithium

Tianqi is the leading lithium company in China, with a lithium concentrate capacity of 740,000 tpa and plans to expand this to 1.34m tpa by constructing a second large chemical grade lithium concentrate production facility, due to begin pilot production in Q2 2019. 

The company currently has lithium carbonate capacity of 10,500 tpa and lithium hydroxide capacity of 5,000 tpa at its Shehong operation in Sichuan province, plus a further 17,000 tpa of lithium carbonate capacity at its Zhangjiagang base in Jiangsu province. Both of these plants use spodumene produced in Western Australia by Talison Lithium Ltd.

Tianqi is building a 24,000 tpa capacity lithium hydroxide plant in Australia to process spodumene – a project that is due for completion in October 2018. It also owns a spodumene mining project in Sichuan, but this has delayed due to multiple setbacks and currently does not have a target start-up date.

Last year, the company reported revenue of Chinese renminbi (Rmb) 3.9bn ($565.4m*), up 109% y-o-y, while its net profit surged by 510% to Rmb 1.5bn ($217.5m). 

Sales of its lithium chemical products totalled Rmb 2.8bn ($406m), a rise of 183.9% y-o-y. Tinaqi said higher sales volumes of lithium carbonate and hydroxide were driven mainly by sharp increases in the production of both electric vehicles and battery cathodes in China, while shortage of supply relative to growing demand helped push up prices.

Tianqi’s lithium carbonate prices rose on average by 147% y-o-y in 2016 and hydroxide prices increased 178.3%.

Tianqi’s sales of primary lithium concentrate, including chemical and technical grades, used respectively in lithium chemicals (carbonate and hydroxide) and as additive in glass and ceramics rose by a relatively modest 23.3% y-o-y meanwhile to Rmb 1.1bn ($159.5m). 

Looking ahead, the company expects that prices for high purity lithium chemicals in China will remain strong due to structural imbalances in the supply chain, which has seen major investment into lithium salt production but comparatively little in high-purity chemicals capacity. This will benefit companies like Tinaqi that are able to producer high end products and can leverage higher prices if shortages emerge.

Figure 7: China lithium hydroxide exports by country (January 2015-February 2017) 
Source: China Customs 

Ganfeng Lithium

Jiangxi Ganfeng Lithium Co. Ltd had 7,000 tonnes of lithium carbonate capacity in 2016, along with 12,000 tonnes of hydroxide 12,000 and 1,500 tonnes of lithium metal.

The company has just this year finished adding a further 15,000 tonnes of lithium carbonate capacity, currently still in pilot production stage but expected to be fully operational by the end of 2017. It is also building another 20,000 tonnes of lithium hydroxide capacity, due to be completed by the end of this year or early 2018. 

Ganfeng also sells industrial grade carbonate but says that current market demand for this product is low, especially when compared with sales of battery grade material.

The company now sources its spodumene from the revamped Mt Marion lithium project, in Western Australia, which it owns jointly with Australian companies Mineral Resources Ltd and Neometals Ltd. More than 30,000 tonnes of lithium concentrates have been shipped from the mine to China this year after the facility recommenced operations in 2016, with shipment volumes expected to accelerate over the coming months.

Ganfeng has a 10,000 tpa spodumene mine in Jiangxi province and stated recently that it is able to fully supply its processing operations with raw material from its own captive sources.

The company increased its revenues by 111% last year to Rmb 2.86bn ($414.7m) while its net profit grew by 265% y-o-y to Rmb 456.3m ($66.2m).

Adding capacity

China’s domestic lithium salt production relies heavily on imported spodumene concentrates. According to the China Nonferrous Industry Association, over 80% of these imports come from Talison alone. 

Many Chinese cathode producers have plans to expand production following last year’s surge in demand and prices, with a raft of new projects due to come online in 2018 and 2019.

New spodumene projects in Australia are expected to be able to meet some of China’s rising lithium demand, although teething problems at some producers, including Talison which is expanding its capacity to 740,000 tpa, is causing concern among Chinese buyers.

Although China is rich in lithium resources, with spodumene deposits in Sichuan and Tibet, brine reserves in Qinghai and Tibet and lithionite ores found in Jiangxi, many of these resources have not been developed and China’s lithium industry could not currently survive without imports. 

According to the China Nonferrous Industry Association, 70% of the lithium production in China comes from imported spodumene concentrates, 16% from domestic brine, 8% from domestic spodumene concentrates and 6% from imported brine. In 2014-2015, domestic spodumene concentrates supply remained steady at around 20,000 tpa, while imports stood at around 400,000 tpa, mostly from Talison.

The barriers China faces to developing its own lithium reserves include the chemistry and accessibility of some of the deposits. Brines in Qinghai have high magnesium content, while Tibet’s deposits are at high altitudes and those in Sichuan are close to towns and cities. As a consequence, China’s imports of lithium raw materials are expected to rise.

Many Chinese companies have already signed offtakes with lithium juniors in order to tie up future supply as existing sourcing arrangements are not likely to meet their growing demand.