Yuahua Industrial Group announced on February 7 that it wholly-owned subsidiary Yahua Lithium (Ya’an) and LG Chem have entered into a long-term supply agreement. Under the agreement, Yahua will deliver 30,000 tons of battery-grade lithium hydroxide (monohydrate) to LG Chem during the period from 2023 to 2026.
Established in January 1947, LG Chem, which is under the South Korean conglomerate LG, is involved mainly in petrochemicals, advanced materials, sustainable materials, and biotechnology. A major part of its portfolio consists of battery materials.
Yahua stated that this deal not only opens another sales channel for its lithium salts but also forms a stable supply partnership for both parties. Furthermore, as Yahua builds up its production capacity for lithium salts, long-term supply agreements such as this will enable the company to effectively turn over its inventory and expand its market share. All in all, this deal contributes to Yahua’s efforts in realizing its strategic aims.
Earlier on November 1, 2022, Yahua Lithium inked a long-term supply agreement with SK On (Shanghai). SK On is a subsidiary of another South Korean conglomerate SK Group, and it focuses on EV power batteries. According to the agreement between Yahua Lithium and SK On, the former will ship no less than 20,000 tons and no more than 50,000 tons of lithium salts to the latter during the period from 2023 to 2025. The annual shipment quantity will increase over the years.
Also, Yahua Industrial Group disclosed in December 2020 that Yahua Lithium had secured an order from Tesla for battery-grade lithium hydroxide. With an effective period from 2021 to 2025, the contract is estimated to be worth USD 630-880 million. Currently, Yahua Industrial Group is the main supplier to Tesla for lithium salts. In particular, Yahua’s lithium hydroxide is used in Tesla’s 4680 cylindrical batteries.
The two main businesses of Yahua Industrial Group are explosives for civilian applications and lithium products. However, the company is also involved in many other fields such as transportation and logistics. In recent years, Yahua has been committing more and more resources into the business related to lithium products because it has made significant financial gains from the rapid growth of the market for new energy vehicles. The focus of the company has been steadily shifting towards lithium products. Furthermore, the company continues to build up its production capacity for lithium salts and obtain sources of lithium resources that are located outside China.
Yahua Industrial Group currently possesses a total production capacity of 43,000 tons per year for various lithium salt products. In 2021, the company initiated projects to add 50,000 tons per year for battery-grade lithium hydroxide and 11,000 tons per year for lithium chloride. Among these projects, the second phase of Yahua Lithium’s capacity building is scheduled to enter operation by the end of 2023. The second phase comprises 30,000 tons per year for battery-grade lithium hydroxide. Yahua Industrial Group forecasts that its total production capacity for lithium salt products will reach above 100,000 tons per year by 2025.
In order to reach the 2025 capacity target, the company completed to two major acquisitions in 2022. The first deal involved buying a stake in Australia-based ABY. ABY’s key asset is the Kenticha lithium mine in Ethiopia. The second deal involved buying a 70.59% stake in Pude Technology. With this transaction, Yahua is able to indirectly own a 60% stake in Pude’s subsidiary Kamativi Mining Company (KMC). Kamativi is a mining town in the northern part of Zimbabwe. KMC has rights to numerous metal mining sites.
Besides the two aforementioned acquisitions, Yahua’s subsidiary Yahua International sealed a share purchase agreement with China-Africa Industrial. Under this agreement, Yahua International will acquire a 70% stake each in SSC Afrique and Indusmin Africa. These targets are wholly-owned subsidiaries of China-Africa Industrial. Yahua said the planned spending on this deal is capped at USD 145 million.
SSC Afrique and Idusmin Africa together have rights over four mining sites in Damaraland, Namibia. The four sites span a total area 720 square kilometers. With this deal, Yahua Industrial Group will have a 70% indirect ownership in each of these four mining sites.
Yahua Industrial Group recently released its financial results for 2022. According to its presentation, its net profit for 2022 is estimated to have reached CNY 4.5-4.7 billion, reflecting a YoY growth rate of 380.45-401.1%. The company said last year’s profit growth was mainly attributed to the boom in the market for new energy vehicles. The demand for lithium salts from EV power batteries kept rising, while prices of lithium salts remained relatively high. Also, the company ramped up efforts to manufacture and sell its products during the reporting period, thereby posting a massive profit growth.
This article is a translation of a Chinese article posted by TrendForce. It contains information that is either sourced from other news outlets or accessible in the public domain. Some Chinese names are transcribed into English using Hanyu Pinyin.