(Yicai) Aug. 3 -- Shares in Yahua Industrial Group surged as much as 4.6 percent today after the Chinese owner of lithium salts assets said it has penned a long-term supply deal for the raw materials used in electric car batteries with battery giant Contemporary Amperex Technology that could be worth around CNY11.1 billion (USD1.5 billion) based on current market prices. This follows an up to USD11.8 billion order from US EV startup Tesla the day before.

Yahua’s share price [SHE:002497] was trading up 1.9 percent at CNY18.56 (USD2.58) as of 1.15 p.m. China time. Earlier in the day it hit CNY19.06.

Unit Yahua Lithium will supply CATL with battery-grade lithium hydroxide, which is a key raw material used in ternary lithium-ion battery cathodes, the Chengdu, southwestern Sichuan province-based parent firm said yesterday.

Although the value of the contract was not stated, the deal could generate revenue of around CNY11.1 billion for Yahua, based on last week’s market price of CNY271,400 (USD37,724) per ton. This would equate to an average annual income of about CNY4.4 billion.

Yahua has just bagged an order from California-based Tesla that could be worth as much as CNY81.7 billion (USD11.3 billion). Yahua Lithium will supply between 207,000 tons and 301,000 tons of battery-grade lithium hydroxide to Tesla from now until Dec. 31, 2030, it said the day before yesterday. This is an extension of a previous agreement signed in December 2020 that was worth USD880 million at the time.

The actual procurement amount by CATL and the pricing will be determined according to the procedure stated in the agreement, said Yahua, which also counts other big battery makers such as South Korea’s SK On and LG Chem among its clients.

CATL is a relatively new customer of Yahua’s, and only started to buy its lithium salts in March. Up to now, the Ningde, southeastern Fujian province-based company has purchased CNY300 million (USD41.7 million) worth.

Yahua, which owns a lithium mine in Sichuan province, has been rapidly expanding capacity to meet surging demand from battery makers. In March it said it would invest nearly CNY2.6 billion (USD362 million) to build a factory in Ya’an, Sichuan province with an annual output of 70,000 tons of battery-grade lithium hydroxide and lithium carbonate. The new plant is expected to hike the firm’s output of lithium salts to more than 170,000 tons per year once complete.

Editor: Kim Taylor