(Yicai) Jan. 24 -- Tianqi Lithium said the Chinese lithium-ion battery materials giant expects to have lost as much as CNY8.2 billion (USD1.13 billion) last year because of plunging product prices, red ink at its Chilean unit, and impairments to scrap an expansion project in Australia.

The net loss could range from CNY7.1 billion (USD980 million) to CNY8.2 billion for the 12 months ended Dec. 31, the Chengdu-based company said in a stock exchange filing yesterday. It would be Tianqi’s first annual loss since 2021. The firm reported a net profit of CNY7.3 billion for 2023.

To prevent further losses, Tianqi announced a decision to end construction work on the second phase of a plant in Western Australia for battery grade lithium hydroxide, a key ingredient for cathode used in power batteries, resulting in a impairment of about CNY1.4 billion. In the wake of plunging prices, the project is no longer economically viable, it said.

Tianqi also revealed that it will book CNY2.16 billion in various losses, including a CNY700 million (USD96.6 million) inventory impairment provision after prices tumbled, and a provision for bad debts on accounts receivable.

The price of lithium salt, previously Tianqi’s cash cow, has sunk to about CNY70,000 (USD9,660) per ton from a historic high of CNY500,000 (USD69,000) in early 2023.

In addition to the price squeeze, Tianqi has a hangover from a major investment in Sociedad Química y Minera de Chile, a South American chemicals giant that partly owns the development rights to the Atacama Salt Flat, one of the world's largest lithium salt mines.

Last April, Tianqi disclosed that SQM owed the Chilean government USD1.1 billion in back taxes, following a court ruling, resulting in a net loss of about USD260 million for the Chinese firm based on its 22.2 percent stake, which was subsequently booked in its first-quarter earnings for 2024.

Moreover, SQM's full-year results are expected to show a significant drop, weighing on Tianqi's annual performance further, the company predicted.

Tianqi is also unhappy with SQM for its change of heart over their business relationship. Without seeking the consent of Tianqi, its second-largest shareholder, SQM joined hands last May with state-owned National Copper Corporation of Chile, also known as Codelco, to develop Atacama. That tie-up could greatly dilute Tianqi’s rights in the project.

After falling by as much as 4.2 percent in Shenzhen this morning, Tianqi’s shares [SHE: 002466] closed 0.6 percent lower at CNY30.99 (USD4.28) apiece. In Hong Kong, the company’s stock [HKG: 9696] rose 1.3 percent to end the week at HKD23.20 (USD2.98).

Editor: Emmi Laine