(Bloomberg) -- Zhejiang Huayou Cobalt Co. said it has reduced lithium output and cut costs after reporting a 49% slump in net income in the first quarter.   

The Chinese producer of battery materials and precursors will use technological innovations to save money in its lithium carbonate operations, President Chen Hongliang, said in an earnings briefing on Monday. He didn’t give any details on the scale or timing on the plan to curb production.

The slowdown in electric vehicle demand and increased production have reversed the supply and demand dynamics for batteries and raw materials, Huayou said in a statement. That’s resulted in a “phased and structural overcapacity” and intensified competition, with product prices for nickel and lithium falling “dramatically” last year, while cobalt and copper markets were volatile, it said.

Huayou will create a manufacturing system of “extremely low cost, extreme high efficiency and extreme energy efficiency,” it said in the statement. 

The company is aiming to reduce costs on purchases, manufacturing and management by 1 billion yuan this year, Vice President Wang Jun said at the briefing. Cost-cutting measures have already improved the debt-asset ratio, and operational cash flows since the fourth quarter, he said.

Huayou cited a drop in metal prices and higher financing costs in its first-quarter earning report released late Friday. That followed a 14% year-on-year plunge in its 2023 earnings to 3.35 billion yuan ($462 million) amid “complex and severe” market conditions.

Battery metals prices have yet to see any meaningful recovery after collapsing last year, while miners, refiners, battery manufacturers and automakers across the world are still working through surplus stock clogging up the supply chain. 

The Chinese firm said its inventory levels for lithium products expanded by more than 3,900% last year, while that for copper and nickel products jumped 61% and 55%, respectively. However, the Chinese company is expecting the market to gradually shift into stable re-stocking this year.

Read More: Lithium Market Struggles to Recover After Epic Boom and Bust

The current “reasonable” prices of battery metals may help improve the cost performance of ternary materials, Huayou said. The trend of developing EVs with high energy density and long driving ranges could support battery nickel demand, it said.

Huayou that its Huafei, Huayue and Huake nickel projects in Indonesia were now in production, while its Arcadia lithium ore project in Zimbabwe was also operating. 

The company, which supplies to companies including Tesla Inc. and Contemporary Amperex Technology Co., added it will focus on “breaking through” into the Japan and South Korea markets, while exploring opportunities in Europe and the US.

(Update with executive comments from 1st paragraph.)

©2024 Bloomberg L.P.