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Roskill: Yahua-Tesla deal indicative of increasing capability and numbers of Chinese lithium convertors

On 29 December 2020, Sichuan Yahua Industrial Group announced thatits subsidiary, Yahua Lithium, had signed a five-year supply agreement with Tesla. The total value of the contract is reported to be US$630-880 million, with Yahua Lithium to provide battery-grade lithium hydroxide to Tesla from 2021 to 2025.

Roskill observes that Yahua Lithium’s entry into Tesla’s supply chain soon after commissioning—Yanhua Lithium was established in 2016—gives strong evidence that an increasing number of Chinese lithium convertors have gained the know-how to manufacture qualified battery raw materials, suitable for use by tier-1 cell makers in South Korea and Japan.

Until recently, there have been only five Chinese mineral-based convertors supplying or scheduled to supply battery-grade lithium hydroxide to the overseas market: Ganfeng Lithium, Tianqi Lithium, Zhiyuan Lithium, General Lithium, and Yahua Lithium.

The agreement between Tesla and Yahua Lithium also highlights the need for OEMs to secure large, long-term deals to ensure supply security as the quantities of lithium hydroxide needed in future are expected to increase rapidly, Roskill notes.

Tesla has been actively seeking sources to fulfil its growing appetite for lithium chemicals, not only from existing producers but also potential suppliers such as Piedmont in North Carolina.

Given the fact that Tesla has ambitions to move a portion of cell manufacturing in-house using its own designs/IP in future, securing long-term contracts for LiOH supply at an early stage will be vital to meeting its aggressive demand requirements and defending its enviable market share for EV sales, Roskill said.

Yahua Lithium commissioned the Ya’an plant in May 2020 with 20ktpy of capacity for battery-grade lithium hydroxide. Alongside its State Lithium and Blossom Lithium operations, this increased the Groups’ total lithium compounds capacity to 32ktpy lithium hydroxide and 6ktpy lithium carbonate.


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