Ganfeng Lithium’s US$2.2 billion investment plan in two China battery projects boosts shares
- Ganfeng has signed a deal with Chongqing Three Gorges Water Conservancy and Oriental Metals to build a plant in Chongqing at a cost of 10 billion yuan
- The lithium miner also plans to build a plant in Dongguan, Guangdong province, at a cost of 5 billion yuan
Shares of Ganfeng Lithium, one of the world’s largest refiners of the strategic metal, rose after it announced a 15 billion yuan (US$2.2 billion) investment to build two battery plants in China.
Ganfeng signed an agreement with Chongqing Three Gorges Water Conservancy And Electric Power and Oriental Metals (Holdings) to build a plant in the southwestern megacity of Chongqing. It will have an unspecified controlling stake in the plant with an annual capacity of 24 gigawatt-hours (GWh).
The 10 billion yuan factory will make lithium iron phosphate (LFP) batteries and ternary lithium-ion batteries, which contain nickel, cobalt and manganese. It will also develop energy management systems, engage in battery research and testing, and include an assembly line for 10GWh of battery packs.
Ganfeng signed another deal to invest 5 billion yuan to construct a lithium battery and energy storage production factory in Dongguan, in southern Guangdong province, with a combined annual capacity of 10GWh.
It will make a range of products including LFP batteries and energy storage used in industrial and commercial applications.
“This investment will help lift the company’s lithium battery products manufacturing scale, market share and research and development capabilities,” it said in a filing to the Hong Kong stock exchange late on Thursday. “It will improve the company’s product structure, core competitiveness and is in line with its up and downstream integration development strategy.”
Ganfeng shares closed 6.4 per cent higher at HK$68.95 on Friday.
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Ganfeng said the two plants will be built by its 65.5 per cent owned Ganfeng LiEnergy, without giving timetables for their completion.
The company currently has battery factories in Xinyu and Yichun in Jiangxi province.
The projects will lift Ganfeng’s total annual battery capacity to around 100GWh, according to Dennis Ip, regional head of utilities research at Daiwa Capital Markets.
“It is obvious to us that Ganfeng is attempting to transform from a lithium miner [and] refiner into an integrated lithium-ion battery maker,” Ip wrote in a note on Friday.
“We see the capital expenditure plan [as] sufficient, but it is too soon to tell if Ganfeng’s transformation will be successful, as that will depend on research and development progress and execution of its team.”
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The company may post a 260 per cent jump in net profit to 18.8 billion yuan for 2022, and rise further this year to 21 billion yuan, according to a forecast by East Money Securities analyst Zhou Xuhui last month.
It posted an 872 per cent net profit rise in the first nine months of 2022 to 13.9 billion yuan, on the back of a sharp surge in lithium prices because of rising demand.
While lithium supplies are expected to remain tight until next year, a surplus is likely to emerge in 2025 when many new production lines are likely to be commissioned, which may lead to sharp price falls, Zhou said.
