(Yicai Global) Feb. 8 -- Shares of Yahua Industrial Group rose after the Chinese lithium salts producer said it had inked a deal to supply South Korean chemical and electric battery giant LG Chem with battery-grade lithium hydroxide over four years.

After jumping almost 2.5 percent in the morning trading session, Yahua [SHE: 002497] closed up 1.2 percent at CNY25.74 (USD3.79) a share today. The benchmark Shenzhen Component Index fell 0.6 percent.

Yahua will sell 30,000 tons of battery-grade lithium hydroxide to LG Chem from this year through 2026, according to an agreement the pair signed yesterday, the Sichuan province-based firm said late the same day.

The two companies will decide the cost of the materials using a jointly agreed formula, which Yahua did not disclose details about. But based on the current market price of battery-grade lithium hydroxide of around CNY500,000 (USD73,608) a ton, the deal is expected to be worth about CNY15 billion (USD2.2 billion) for Yahua.

The LG Chem deal follows a similar battery-grade lithium hydroxide supply agreement signed by Yahua and the Chinese unit of South Korean battery maker SK On in November, under which Yahua agreed to provide SK On with as much as 30,000 tons of products over three years, starting in 2023.

At the end of 2020, Yahua also agreed a five-year contract to supply US electric vehicle giant Tesla with battery-grade lithium hydroxide.

Yahua has been expanding its lithium battery business upstream in recent years. It now owns the development rights to a lithium mine in Sichuan, and can produce about 40,000 tons of battery grade lithium salt products a year, including lithium hydroxide and lithium carbonate.

Thanks to the surge in lithium salt product prices last year, Yahua expects its annual net profit to have skyrocketed from 381 percent to 402 percent to between CNY4.5 billion and CNY4.7 billion (USD664 million to USD693 million), it said last month.

Editor: Martin Kadiev