China's Yahua bags five-year deal to supply lithium to Tesla

Beijing

CHINA'S Sichuan Yahua Industrial Group Co Ltd said on Tuesday it had signed a deal to supply battery-grade lithium hydroxide to US electric vehicle (EV) manufacturer Tesla Inc for the next five years.

Yahua, which is based in south-west China's Sichuan province, put the total value of the contract, signed by its wholly-owned subsidiary Yaan Lithium, at US$630-US$880 million over 2021-25, a Shenzhen Stock Exchange filing showed.

Analysts at Daiwa Capital Markets said that value translated into a total lithium hydroxide procurement amount of 63,000-88,000 tonnes, or 12,600-17,600 tonnes per annum.

In May this year, Yahua put a 20,000 tonnes per year lithium hydroxide plant in Yaan city into operation, more than doubling its previous capacity, even as oversupply and the impact of Covid-19 on lithium demand pushed prices to multi-year lows.

The company's shares rose the maximum 10 per cent on Wednesday to 19.95 yuan, as investors cheered a major client win for Yahua, and are up almost 157 per cent year-to-date.

Tesla, whose share price has climbed by around 700 per cent this year, started delivering the first vehicles from its gigafactory in Shanghai in December 2019.

It already sources lithium - an ingredient in EV batteries - from China's Ganfeng Lithium , one of the world's top lithium producers.

The Yahua deal underscores Tesla's "huge demand" for battery-grade lithium hydroxide, "particularly in view of the ramp-up of Model Y production" in Shanghai, the Daiwa analysts wrote in a note.

"We expect Ganfeng will continue to be the major if not largest lithium hydroxide supplier of Tesla on the back of this strong demand." REUTERS