China’s Tianqi Lithium slumps in biggest Hong Kong debut of 2022

Shares in Tianqi Lithium fell as much as 11 per cent in Hong Kong trade following the largest share sale in the Asian financial hub this year.

Its shares dropped to as low as $HK72.65 ($13.68) in early trade on Wednesday, before trimming losses. The supplier of the key material used in batteries, already listed in Shenzhen, sold the stock at $HK82 a piece in a secondary listing in Hong Kong. That was the top of a marketed range in an offering that raised about $HK13.5 billion.

Tianqi, along with joint venture partner and IGO, in May announced it had achieved first commercial production of battery-grade lithium hydroxide at its Kwinana plant south of Perth.

The plant is the biggest lithium hydroxide facility to be built and operated outside of China and the product will be exported from Fremantle by container to customers across the globe.

The plant’s feedstock spodumene concentrate is sourced from the Greenbushes mine — one of the world’s most coveted lithium operations — in the State’s South West, which operates as a joint venture between US chemicals giant Albemarle (50 per cent), Tianqi (25 per cent) and IGO (25 per cent).

The slump in Tianqi stock in Hong Kong suggests investors remain wary of putting money into newly listed stocks in Hong Kong. Three other companies that debuted in the city on Wednesday also dropped. The negative start casts a shadow over a pipeline of large offerings in the city, including that of China Tourism Group Duty Free, the world’s largest travel retailer that is planning a share sale of as much as $US3 billion ($4.4b).

Tianqi’s Hong Kong listing, nevertheless, caps a major turnaround for the firm after a debt crisis just two years ago forced it to sell stakes in prize assets, and raised questions for management. The company’s revival was aided by an eye-popping gain of more than 1000 per cent for lithium prices since mid-2020.

Tianqi mines lithium in WA and produces compounds and derivatives in China. The Chinese producer first brought up a secondary listing in 2018, but shelved the plan amid falling lithium prices and liquidity problems. In 2020, the Chinese company sold a stake in Greenbushes to IGO for $US1.4b to help repay debt.

A fresh global push for electrified transport is fuelling a demand boom for lithium — a key material used in EV batteries. According to Bloomberg, lithium prices could stay elevated amid a tight market this year.

Tianqi is planning to more than double its lithium refining capacity in the next three years to about 110,000 tonnes, from about 45,000t now, chief executive Frank Ha said. “The continued ramp-up of revenues and prices is something that we can foresee,” Mr Ha said.

Tianqi’s Hong Kong share sale has attracted seven cornerstone investors including LG Chem and battery maker CALB Co., the prospectus shows.

Most companies that debuted in Hong Kong this year fell on their first day of trade, data compiled by Bloomberg show. Retailer Miniso Group, wealth management company Noah Holdings and piped natural gas distributor Huzhou Gas slumped as much as 4.9 per cent, 7.3 per cent and 9.5 per cent, respectively, on their first day of trade on Wednesday.

Big offerings have dwindled this year amid rising inflation, hawkish central banks and a jump in volatility that has led the Hang Seng Index to retreat more than 10 per cent this year.

Strong appetite for listings in the city has yet to return, according to Ke Yan, head of research at DZT Research. “Everyone is still working hard to find deal to profit from,” he said.

Tianqi’s shares plunged in Shenzhen on Monday after the wife of one prominent investor raised concerns about the firm’s valuation ahead of the secondary listing. The shares on the mainland touched an all-time high last week.

Morgan Stanley, China International Capital and CMB International Capital are joint sponsors of the Hong Kong offering.

Bloomberg