China’s Ganfeng Lithium shares plummet in HK trading debut

Hong Kong Exchange
The flag of the Hong Kong Exchanges & Clearing Ltd. (HKEx), center, flies in the Central district of Hong Kong, China, on Wednesday, March 2, 2016. Photographer: Justin Chin/Bloomberg

Major global battery raw material supplier Jiangxi Ganfeng Lithium Co sank on its trading debut in Hong Kong as weaker industry sentiment was compounded by renewed turmoil in global markets.

The stock sank as much as 28 percent after opening at HK$16.50, the lowest end of its offer range. The firm’s Shenzhen-listed shares tumbled to their daily limit for a second day, as Chinese commodities and battery stocks in China joined a fresh retreat for equities worldwide. The MSCI Asia Pacific Index headed for its biggest drop since June 2016.

The Chinese company’s listing was already clouded by falling lithium prices and widespread speculation about too much supply ahead. The steep losses in Hong Kong may not bode well for Livent Inc, a lithium spin-off from chemicals producer FMC Corp., due to go public later Thursday in New York.

“If the external situation was stable, people would probably just dismiss declines in lithium prices,” Helen Lau, analyst at Argonaut Securities Asia in Hong Kong, said by phone. “But everyone is looking at a screen full of red and it’s very very difficult to ask clients to buy a new stock at this time. There is too much uncertainty and risk.”

Other battery-related companies also joined today the collapse, which took Ganfeng’s Shenzhen stock to a 45-percent loss for this year:

Ganfeng’s rival Tianqi Lithium Corp., which is also planning a Hong Kong listing, fell 10 percent to head for its lowest close since early 2017. Zhejiang Huayou Cobalt Co., the world’s top cobalt refiner, fell 9.8 percent Battery materials supplier Ningbo Shanshan Co. slumped to its lowest since last June.

“Investors have decided to pause their investments around lithium and cobalt,” said Chris Berry, a New York-based analyst at House Mountain Partners LLC and consultant to companies in the sector. “The Ganfeng IPO is going to raise less money than we thought and Livent is probably going to struggle a little bit just like Ganfeng” Berry said.

Prices for lithium have declined this year amid concerns over the arrival of new supply and signs of weaker demand in China, falling about 8 percent in 2018, according to a Benchmark Mineral Intelligence index.

Lithium producers needed to be more conservative in the face of concerns about oversupply, Ganfeng’s Vice Chairman Wang Xiaoshen said in an interview on Oct. 9. He delivered a cautious message on growth and said it was time to “fasten seat belts” for lithium producers. He acknowledged in the interview that marketing the Hong Kong stock against the background of unstable equities markets and weaker lithium prices had been challenging.

Also read:

China’s Ganfeng Lithium said to raise $421m in Hong Kong IPO