(Yicai Global) April 25 -- A number of Chinese lithium firms have reported a sharp drop in first-quarter profits after lithium salt prices fell. Their shares sank today.

Hunan Changyuan Lico [SHA: 688779] and Zhongke Electric [SHE: 30035] tumbled by the 20 percent daily trading limit, while Shenzhen Dynanonic [SHE: 300769] dropped 15.3 percent and Jiangxi Special Electric Motor [SHE: 002176] by 10 percent.

Among the nearly 30 Chinese lithium companies that have released earnings reports for the three months ended March 31, net profits fell at 18 from a year ago, and some even went into the red. Revenues declined at 12 of the companies.

Cathode material producer Changyuan Lico said yesterday that the growth of the new energy vehicle market has slowed and prices of upstream materials have fallen amid intensifying competition, resulting lower gross profit. Its first-quarter revenue was CNY1.93 billion (USD279 million), down 43 percent from a year earlier, and net profit fell to CNY929,000 (USD134,289), after halving.

Jiangxi Special Electric Motor said that the decline in the performance decline at its lithium salt business was due to the lower sales and prices of lithium salt.

Miracle Automation, which recycles lithium batteries, said that demand from NEV makers has weakened, and the prices of some battery materials have fallen sharply. In the short term, the usage rate of downstream battery factories and material plants is insufficient, which affects sales at the firm's lithium battery recycling business. In the first quarter, the average transaction price of cobalt, nickel and lithium fell by 22.9 percent, 4.6 percent and 18.8 percent month on month, resulting losses for its recycling business. 

Since last November, the average price of battery-grade lithium carbonate has plunged 70 percent from a high of CNY595,000 per metric ton to as low as CNY175,000, but there are signs that the decline may be slowing.

According to data from Shanghai Ganglian E-Commerce Holdings, from April 21 to 24, the average price of battery-grade lithium carbonate remained unchanged from April 20 at CNY180,000 per metric ton.

Industry insiders said that the price of lithium salt is based largely on the sales expectations for new energy vehicles, and NEV sales in China are expected to reach 8 million this year, so demand for lithium salt is likely to recover.

Editor: Tom Litting