Lithium buyers dismiss supply concerns as Tianqi faces looming repayment deadline

Ecopro BM

27/11/2020 11:16

* Tianqi Lithium due to make $1.9 bln loan repayment by
end-Nov
    * Firm has warned default could hit output but customers are
calm
    * Lithium supply deficit is on the way as EV sales soar -
analyst 

    By Heekyong Yang and Tom Daly
    Nov 27 (Reuters) - Customers of Tianqi Lithium Corp
 002466.SZ  insist they have other suppliers to turn to if the
heavily indebted Chinese firm, which is facing an imminent loan
repayment deadline, fails to secure the refinancing needed to
stave off a default. 
    Tianqi, one of the world's top makers of lithium chemicals
used in electric vehicle (EV) batteries, on Tuesday repeated its
warning that production could be severely impacted if it fails
by the end of this month to make a $1.9 billion repayment on a
loan used to buy a stake in Chile's SQM in 2018.  urn:newsml:reuters.com:*:nP8N2I502H
    The firm currently has a 12.9% share of the global lithium
chemical market, says Benchmark Mineral Intelligence analyst
George Miller.
    That puts it third behind U.S.-based Albemarle Corp  ALB.N 
and SQM  SQMA.SN  in the group of major global producers that
could pick up the slack if Tianqi defaults on deliveries.
   Asked if it could ensure supply to customers from December,
Tianqi declined to comment outside of exchange filings. 
    But its clients, which include South Korean battery makers
LG Chem  051910.KS  and SK Innovation  096770.KS , as well as
their compatriot EcoPro BM  247540.KQ  and Sweden's Northvolt,
are hardly panicking.
    "SK Innovation would not likely face any supply issues as
the company has signed contracts with other suppliers," a
spokesperson said, without providing further details.
    Battery materials producer EcoPro BM said while there were
"operational issues" at Tianqi's Kwinana plant in Australia -
the intended source of lithium hydroxide in their 4-1/2 year
contract - the supplier was sending material from China instead.
    Tianqi in March postponed commissioning of Kwinana's 24,000
tonne-per-year first phase, citing liquidity problems, after the
coronavirus demand shock exacerbated lithium market oversupply
that had already sent prices plunging.  urn:newsml:reuters.com:*:nL4N2BF0DE
    LG Chem declined to say if it was receiving supply from
Kwinana this year as planned, while Northvolt said its deal with
Tianqi, covering 2020-25, is still active and it has a
"multi-feed strategy in place for all raw materials".    
    Even if Tianqi manages to avoid default, Benchmark's Miller
still sees its market share slipping to 9% by 2025. 
    He expects a "significant effort to keep Tianqi afloat" from
China, especially as the company is a key player in the
strategic lithium-ion battery sector and operates, with
Albemarle, the giant Greenbushes lithium mine in Australia. 
    With surging EV sales in the EU and China and "few near-term
supply-side expansions to compensate, we forecast a forthcoming
deficit in lithium supply", he said.

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 (Reporting by Heekyong Yang, Tom Daly and Johannes Hellstrom;
Additional reporting by Min Zhang and Mai Nguyen; Editing by Jan
Harvey)
 ((tom.daly@thomsonreuters.com; +86 10 5669 2119;))