Mining’s old guard needs strong medicine
A new report details subpar investor returns in the mining industry over the last decade, particularly big cap diversified companies which have not adapted to new realities.
Contemporary Amperex Technology Co. Ltd. reported an 83% jump in revenue that well outdid market expectations, fueled by climbing demand for cleaner vehicles and falling raw materials costs.
Sales at the world’s biggest maker of battery cells for electric cars came in at 89 billion yuan ($13 billion) for the three months ended March 31, according to an exchange statement Thursday, better than the 75.1 billion yuan forecast by analysts.
Net income at the Tesla Inc. supplier was 9.8 billion yuan, up from 1.5 billion yuan the previous corresponding quarter when an extraordinary first-quarter derivatives charge shrank earnings. CATL’s gross margins rose 6.8 percentage points versus the same time last year to 21.3%, though slipped slightly on the previous quarter.
CATL also said it plans to raise 4 billion yuan in capital via its units for projects in Indonesia. The resource-rich Southeast Asian nation is home to many of the precious ingredients found in electric car batteries.
In April last year, CATL said it plans to join PT Aneka Tambang and PT Industri Baterai Indonesia on a project that spans everything from nickel mining to battery materials, recycling and an EV batteries factory. CATL founder Yuqun Zeng said at the time the project, to be based in the country’s North Maluku province, would “become an emblem of the everlasting friendship between China and Indonesia.”
CATL shares rose as much as 4% in early trade Friday.
Read more: CATL Says New Super Strong Battery May Power Electric Flight
Bloomberg Intelligence analysts including Joanna Chen said CATL will continue to benefit from strong sales momentum that should in turn boost margins and increase production. Lower raw material costs should also support profitability, Chen said.
CATL could sustain its strong sales momentum through 2023 while margin recovery continues on falling lithium costs.
Greater volume scale and lower lithium prices could continue to slash per-unit production costs, enabling profitability to recover further even with lower selling prices as CATL passes along some raw-material cost relief to customers.
Ningde, Fujian-based CATL also remains in a comfortable position globally as the world’s market leader with an almost 34% share based on data for first two months of this year, according to SNE Research. Its nearest competitor is BYD Co., with 18%.
Its dominance was on display at China’s premier auto show this week in Shanghai, where both local and international automakers showed renewed vigor after China’s punishing Covid lockdowns and restrictions.
At the show, CATL unveiled a new battery technology that could eventually have enough energy density to power an electric aircraft, it claimed. The condensed state battery will initially start to be mass produced later this year, but at a lower density for EVs.
Another piece of new battery technology, the company’s sodium-ion battery will be mass produced and installed this year into cars for the first time. Chery Automobile Co. will be the first brand to use CATL’s newly developed sodium-ion batteries, which are cheaper to produce, shorter range batteries.
More broadly in China there is a car price war, started by Tesla amid slightly subdued demand for EVs. Despite car purchases growing over the past 12 to 18 months, sales have wobbled in the most recent quarter, with China total passenger vehicle sales down 13.4%.
With electric and hybrid cars making up an ever greater portion of overall sales, but demand not quite keeping up with supply, that could dent battery makers like CATL, which have spent billions of dollar expanding output.
(By Danny Lee, with assistance from Linda Lew)
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