(Yicai Global) July 13 -- Tibet Mineral Development is expecting profit to plunge by as much as 95.7 percent in the first six months from the same period last year as the Chinese mining firm said it has been badly affected by a sharp drop in the price of lithium carbonate, a key raw material used to make electric car batteries.

Tibet Mineral anticipates net profit to plummet by between 93.6 percent and 95.7 percent in the six months ended June 30 to between CNY20 million (USD2.8 million) and CNY30 million, the Lhasa-based company said in its performance forecast report released yesterday.

Lithium salt processing plants and factories that make lithium batteries for electric cars have adopted an on-demand procurement strategy due to big swings in the price of lithium, Tibet Mineral said in the report. This, together with a sharp drop in prices, caused the firm’s revenue from lithium concentrate, which is the raw material needed to make lithium carbonate, to drop considerably in the first half from the same period last year.

Lithium carbonate was trading at CNY307,000 (USD42,800) per ton at the end of June, almost half of the record high of CNY600,000 (USD83,700) per ton reached last year.

The price surged more than 10-fold in 2022 from what it was at the beginning of 2021, thanks to a boom in the new energy vehicle market, but then started to slide at the end of last year as more capacity came on the market.

The drop in performance was already reflected in Tibet Mineral’s first-quarter report, where it posted a 86.8 percent dive in net profit from a year earlier to CNY17.3 million (USD2.4 million) and a 74.4 percent slump in revenue to CNY90 million.

By contrast, last year, when the price of lithium carbonate was high, profit surged more than five-and-a-half-fold from a year earlier to CNY795 million (USD1.1 million) while revenue soared nearly three-and-a-half times to CNY2.2 billion.

Tibet Mineral’s share price [SHE:000762] was trading flat at 0.4 percent at CNY30.19 (USD4.21) as of 12.30 p.m. China time today. The firm’s stock has lost 65 percent in value since it hit a record high of CNY86.32 (USD12) in September 2021. Between November 2020 and September 2021 the stock surged nearly seven-fold on the sharp rise in the price of lithium.

Tibet Mineral, which extracts lithium concentrate from salt-lake brine, is the first listed lithium salt and raw materials producer to announce its first-half forecast, and that of other firms in the industry is not optimistic.

Qinghai Salt Lake Industry, for instance, logged a 36.3 percent plunge in profit in the first three months from a year earlier while revenue sank 38.2 percent, according to its first-quarter report. By contrast, profit surged three-and-a-half fold in 2022 year on year, and operating income nearly doubled.

The big swings in the price of lithium carbonate and the negative impact it is having on the battery sector is attracting attention. Guangzhou Futures Exchange is considering introducing lithium carbonate futures and options products to help market players hedge against risks. But although it announced the rules for lithium carbonate futures and options contracts on July 11, no date has been set for when these futures will start trading.

Tibet Mineral produced 9,936.6 tons of lithium concentrate last year, an increase of 10.2 percent from the year before, while sales surged 66.4 percent to 10,603.3 tons, according to its 2022 financial report. Due to the sharp rise in the price of lithium carbonate that year, the proportion of revenue brought in by its lithium concentrate business jumped to 85.5 percent from 50.2 percent the previous year, it added.

Editor: Kim Taylor