China's CATL Feels the Pinch of a Lithium Price Slump it Created

A multi-year long slump in prices of lithium has now started to bite the world’s largest battery-maker, CATL.

The Chinese supplier of batteries used in electric vehicles across the globe warned on Tuesday that its annual revenue fell for the first time last year.

It also said its profit grew at its slowest pace since 2019, which caused a 3.8% fall in the company’s shares in the morning session on Wednesday.

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CATL’s weak numbers come despite strong growth in global shipments of EV and energy storage batteries. Global EV power battery shipments increased by 22% on the year, while shipments of energy storage batteries rose by 65% over the same period.

CATL holds a 37% share of the global EV-battery market.

But for CATL, the problem was not that of demand, but that of rapidly declining prices of a key battery raw material – lithium.

CATL said in a securities filing late on Tuesday that its revenue fell between 8.7% and 11.2% last year after it adjusted product prices to reflect a decline in the price of raw materials such as lithium carbonate, leading to a decline in operating income although sales volumes grew.

Ironically, however, the lithium problem may be one that CATL itself created.

In 2022, while prices of the battery material were soaring to life-time highs, CATL intervened in the market by opening a huge lithium hub in the southern Chinese province of Jiangxi.

Prices of the metal have since tumbled by nearly 86% over the past two years from its peak in late 2022.

‘Mission accomplished’

In November, CATL’s founder Robin Zeng told Reuters that they were now stopping production at the Jiangxi mine as they had achieved their goal of lowering lithium prices.

CATL’s intervention was intended to “reduce the cost dramatically,” he said.

CATL has faced criticism in China from competitors and others who say its size gives it power over pricing of battery minerals or the ability to muscle out competitors.

Zeng told Reuters CATL was not aiming to drive rival miners out of business by pushing down lithium prices and recognized the need for a profitable supply chain.

“As the big player in batteries, we want to maintain, or try our best to maintain oxygen for everyone,” Zeng said.

Except CATL’s moves to lower lithium prices have had the opposite effect in China, where it CATL had a 45% market share as measured by batteries in Chinese-made EVs last year.

Last year, lithium battery-maker Zhejiang Huayou Cobalt appealed to Chinese authorities to tackle overcapacity in the industry.

“Some companies’ operations are facing great difficulties, there are suspended operations, falling prices, idled equipment and staff layoffs,” the firm’s chief said.

Plunging prices have also forced companies within China to cut output and many across the world to shut down lithium mines altogether.

Vishakha Saxena, with Reuters

Vishakha Saxena

Vishakha Saxena is the Multimedia and Social Media Editor at Asia Financial. She has worked as a digital journalist since 2013, and is an experienced writer and multimedia producer. As a trader and investor, she is keenly interested in new economy, emerging markets and the intersections of finance and society. You can write to her at [email protected]