By Jiahui Huang

Tianqi Lithium shares fell sharply after the Chinese lithium producer warned of widening losses caused by weak product prices and a tax dispute in Chile.

The lithium producer's Hong Kong-listed shares fell 19% to 28.40 Hong Kong dollars (US$3.62) in early trade Wednesday, on track of their largest one-day percentage loss on record. Its Shenzhen-listed shares fell 10%, the daily limit, to 40.63 yuan.

The declines came after the company said late Tuesday that it expected to post a first-quarter loss of between CNY3.60 billion (US$497 million) and CNY4.30 billion, compared with CNY4.88 billion in profit a year ago and a widening from a CNY801 million net loss in the fourth quarter.

Tianqi cited a "substantial decline" in the sale prices of lithium products, and a big decrease in their gross profit, the same pressures it mentioned during fourth-quarter results. It also cited the effects of an associate company's tax dispute in Chile, noting that the associate expects the case to reduce net profit in the first quarter by about US$1.1 billion.

Lithium carbonate prices, a key raw material for EV batteries, have dropped about 60% from their peak in July last year, mostly on slowing demand for electric vehicles in China.

The Shenzhen Stock Exchange issued a warning letter to Tianqi Lithium following the guidance, asking it to analyse why losses widened and whether it is at risk for further losses. It also asked for a report on the company's Chilean investment, requesting that it respond publicly on all counts by Friday.

Nomura analysts led by Ethan Zhang said in a research note that the wider loss was worse than expected, "considering that lithium prices have stabilized of late" and the benefits of a new pricing mechanism for its Greenbushes mine in Australia this year.

The latter change is expected to reduce production costs at the world's largest hardrock lithium mine in operation.

Nomura kept a buy rating on the shares with a target price of CNY50.

Write to Jiahui Huang at

(END) Dow Jones Newswires

04-24-24 0017ET