October 11, 2018 / 1:57 AM / 10 days ago

UPDATE 1-China's Ganfeng Lithium tumbles 28 percent on Hong Kong debut

(Recasts, updates shares, adds details)

By Julia Fioretti

HONG KONG, Oct 11 (Reuters) - China's top lithium producer Ganfeng Lithium tumbled as much 28 percent on its Hong Kong debut, a stark warning sign to fellow Shenzhen-listed counterpart Tianqi Lithium which is also planning a listing in the city.

Shares of Ganfeng, a supplier to carmakers like Tesla and BMW, fell to a low of HK$11.80 in early morning trading after opening at HK$15.30 on Thursday.

That was well below its offer price of HK$16.50, which was already at the bottom of the stock's indicative range.

Ganfeng's listing came as world markets slid to a 3-month low on Wednesday, while Hong Kong's benchmark Hang Seng index is down 20 percent from its January highs.

Although demand for lithium is expected to rise as electric cars become more mainstream, an oversupply of the metal has weighed on prices, causing them to drop as much as 38 percent this year.

Ganfeng recently signed contracts with Tesla and BMW to supply lithium components to their battery suppliers. Lithium is a key ingredient in rechargeable batteries.

The company raised $421 million in its Hong Kong listing and could raise as much as $448 million if a greenshoe, or over-allotment, option is exercised within one month of the start of trading.

Ganfeng's shares in Shenzhen had already slumped 10 percent on Wednesday, making it the worst performer on the China Securities Index 300 Materials Index.

The company made a net profit of 478.7 million yuan ($69.08 million) in the second quarter of this year, up 33 percent from the first quarter. Its 2017 revenue jumped 54 percent to 4.38 billion yuan from 2016.

Ganfeng plans to use the proceeds from its Hong Kong listing to acquire lithium resources and expand its production capacity of lithium metals, batteries, compounds and recycling.

Citibank was the sole sponsor for the listing.

$1 = 7.8368 Hong Kong dollars $1 = 6.9298 Chinese yuan renminbi Reporting by Julia Fioretti, Julie Zhu and Donny Kwok; Editing by Richard Pullin

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