Chengxin Shares Remain Steady Amid $2.4B Lithium Supply Plan

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Shares in Chengxin Lithium Group showed little movement today, despite the company’s announcement yesterday that it is in the process of finalizing a long-term supply agreement with a future strategic investor. This deal could potentially be valued at up to 17 billion Chinese yuan (approximately $2.4 billion).

Throughout the trading day, Chengxin Lithium’s stock price fluctuated and briefly dipped below yesterday’s close. By the end of the session, it managed a gain of 1.9%, closing at 38.12 CNY ($5.36).

Since late last month, when the Shenzhen-based company revealed that Huayou Holdings, a major producer of ternary cathode materials, planned to acquire a 6% stake, its share price has surged around 43%. Yesterday marked its highest trading level since early February 2023. However, the investment process with Huayou is not yet finalized.

The agreement states that Huayou will purchase 221,400 tons of lithium salts over the next five years, based on the framework agreement that is close to being signed. Actual transaction prices will be negotiated based on current market rates.

Calculations using the current industry benchmark price for battery-grade lithium hydroxide suggest that the contract could be worth approximately 17.2 billion CNY. If lithium carbonate prices are used instead, the total estimated value increases by roughly 16%.

Lithium hydroxide is a vital raw material for producing high-nickel ternary cathode materials. Huayou Cobalt, a key subsidiary of Huayou, is one of the world’s leading companies in mining and processing raw materials like cobalt and nickel for ternary lithium batteries. It is also a prominent supplier of high-nickel cathode materials globally.

Chengxin Lithium operates lithium mining and salt processing facilities worldwide. As of the end of June, its annual production capacity reached 137,000 tons of lithium salts, including 60,000 tons in Indonesia, according to its latest semi-annual report. Huayou Cobalt also runs a high-nickel ternary cathode material plant in Indonesia.