Electric cars: China powers

the battery supply chain

https://www.ft.com/content/455fe41c-7185-11e9-bf5c-6eeb837566c5

Please use the sharing tools found via the share button at the top or side of articles. Copying
articles to share with others is a breach of FT.com T&Cs and Copyright Policy. Email
licensing@ft.com to buy additional rights. Subscribers may share up to 10 or 20 articles per
month using the gift article service. More information can be found here.
https://www.ft.com/content/455fe41c-7185-11e9-bf5c-6eeb837566c5

In a factory beside a paddy field on the outskirts of a small city in central China,
one of the core components of the modern global economy is being produced.
Inside a warren of cement and steel pipes, rock — mined in Australia — is heated
to 1,000C in a giant coal-fired boiler. It is then leached with acid, dried and purified
into a fine white powder that carries the charge inside a battery that enables an
electric car to drive. The product, lithium carbonate, sells for more than $11,500
a tonne and global demand is expected to double by 2023, according to
Volkswagen.
“This all used to be countryside,” a young staff member says in the company
electric car, a black Tesla Model S, as it approaches the factory gates.
The city of Xinyu supplied lithium to China’s nuclear weapons industry in the
1960s, part of Mao Zedong’s push to place industry deep into the rural heartland
of the country in case of a nuclear attack. Now the city supplies Tesla, BMW and
VW, making it a vital node on the global electric car supply chain — the 21st-
century equivalent of the refineries, pipelines and ships that supported the age of
oil-based transport which batteries could eventually replace.
In the space of a few years Chinese companies have become some of the world’s
largest producers of lithium, a lightweight metal that is a key raw material for
batteries. They have bought up mines from Australia to South America and are
building plants in China to make lithium chemicals and batteries.

The latest example of China’s ability to channel prodigious amounts of capital to

fast growing industries, the country produced over 60 per cent of the world’s
lithium in April, compared with less than 1 per cent from the US, according to
Benchmark Mineral Intelligence.

China’s dominance in the electric car supply chain has triggered growing
concerns in a trade-war obsessed Washington and Brussels, with both fearing
that they could be squeezed out of the next generation of industry. At the
beginning of May two US senators, Lisa Murkowski and Joe Manchin, proposed
a bipartisan bill designed to boost US production of critical minerals such as
lithium. And the European Investment Bank has pledged €350m to back Swedish
battery start-up Northvolt, which aims to build a battery factory in Sweden and
source raw minerals such as lithium from Europe.
Batteries Add to myFT Electric cars: China powers the battery supply chain The
US and Europe fear the country’s dominance of the global market in lithium Share
on Twitter (opens new window) Share on Facebook (opens new window) Share
on LinkedIn (opens new window) Save Save to myFT Henry Sanderson in Xinyu,
China yesterday Print this page 98 In a factory beside a paddy field on the
outskirts of a small city in central China, one of the core components of the
modern global economy is being produced. Inside a warren of cement and steel
pipes, rock — mined in Australia — is heated to 1,000C in a giant coal-fired boiler.
It is then leached with acid, dried and purified into a fine white powder that carries
the charge inside a battery that enables an electric car to drive.
The product, lithium carbonate, sells for more than $11,500 a tonne and global
demand is expected to double by 2023, according to Volkswagen. “This all used
to be countryside,” a young staff member says in the company electric car, a
black Tesla Model S, as it approaches the factory gates.
The city of Xinyu supplied lithium to China’s nuclear weapons industry in the
1960s, part of Mao Zedong’s push to place industry deep into the rural heartland
of the country in case of a nuclear attack. Now the city supplies Tesla, BMW and
VW, making it a vital node on the global electric car supply chain — the 21st-
century equivalent of the refineries, pipelines and ships that supported the age of
oil-based transport which batteries could eventually replace. In the space of a few
years Chinese companies have become some of the world’s largest producers of
lithium, a lightweight metal that is a key raw material for batteries. They have
bought up mines from Australia to South America and are building plants in China
to make lithium chemicals and batteries. The latest example of China’s ability to
channel prodigious amounts of capital to fast growing industries, the country
produced over 60 per cent of the world’s lithium in April, compared with less than
1 per cent from the US, according to Benchmark Mineral Intelligence.China’s
dominance in the electric car supply chain has triggered growing concerns in a
trade-war obsessed Washington and Brussels, with both fearing that they could
be squeezed out of the next generation of industry.

At the beginning of May two US senators, Lisa Murkowski and Joe Manchin, proposed a
bipartisan bill designed to boost US production of critical minerals such as lithium. And the
European Investment Bank has pledged €350m to back Swedish battery start-up Northvolt,
which aims to build a battery factory in Sweden and source raw minerals such as lithium from
Europe.

The brine pools of SQM's lithium mine in the Atacama desert, northern Chile © Reuters

At a time when western governments are watching Chinese industrial policy for
signs of unfair advantage, one of the interesting features of its new prominence
in lithium is that it has not been achieved by the state-owned companies. Instead,
it is the product of a group of entrepreneurs who “jumped into the sea”, as the
Chinese call the launch of a private business — sensing an opportunity in
batteries for mobile phones and then electric cars. Revenues for Ganfeng Lithium
and its larger Shenzhen-listed rival Tianqi Lithium have risen from around $100m
a year to over $1bn in a decade, joining the ranks of the largest producers. “The
Wild West nature of Chinese capitalism has allowed companies to grow that
quickly,” says Sam Jaffe, managing director of Cairn Energy Research Advisors,
who analyses the battery market. “The government gives signals that a land rush
is starting and then you have these entrepreneurs that get in their stagecoaches
and gallop as fast as they can to get to the land. Some of them win [but] a lot of
them lose.”
Qinghai, China. A billboard featuring Chinese President Xi Jinping promoting the production of
lithium used to power the country’s electric vehicle revolution © Bloomberg

For most of the 20th century the US was the largest producer of lithium, but the
Kings Mountain mine in North Carolina shut in the 1980s after competition from
Chile. After that the market was dominated by a cosy oligopoly known as the Big
Three: SQM of Chile, which was controlled by the son-in-law of the country’s
former dictator Augusto Pinochet, and US producers Albemarle and FMC.
In 2015, Albemarle acquired rival US producer Rockwood and last year FMC split
off its lithium business into a separate entity, New York-listed Livent.Founded in
2000 by Li Liangbin, who previously worked for a state-owned lithium plant,
Ganfeng began life as a customer of SQM, helping to purchase the lithium
extracted from the Atacama Desert in Chile. In his office in Shanghai, vice-
chairman Wang Xiaoshen remembers that in 2004 Mr Li offered a 15 per cent
stake in Ganfeng to SQM, in order to secure lithium supplies.
“At that time SQM hired Deloitte to do due diligence and after that [SQM] quit. It
said ‘no thank you’. Ganfeng at that time was a very small company,” recalls Mr
Wang, who had worked for the country’s first lithium plant in the far western city
of Urumqi, in Xinjiang.
Instead, Ganfeng became a competitor: listing on the Shenzhen Stock Exchange
in 2010 and starting to secure supplies of lithium around the world. In September
2015 it bought a stake in the Mount Marion mine in Western Australia, eventually
building this into a 50 per cent stake. It also has a 9 per cent stake in another
Australian miner Pilbara Minerals, which owns one of the largest hard rock
deposits of lithium, the Pilgangoora project that came with a 10-year supply
agreement for its lithium. This week Ganfeng said it would buy a 30 per cent stake
in London-listed Bacanora Minerals, which is developing a lithium project in
northern Mexico.
Ganfeng agreed a 10-year supply deal with VW last month. The carmaker aims
to launch more than 70 electric car models over the next 10 years — a target of
22m electric vehicles by 2028.
“Lithium will in the near future be one of the most sought-after raw materials on
earth,” VW said.
But it is in Argentina where Ganfeng’s most ambitious project is taking shape,
one that could turn it into a truly global company. In 2018 Ganfeng bought a 38
per cent stake held in the Cauchari-Olaroz project from SQM. Then in April it
agreed to boost its stake in the project to 50 per cent, paying $160m in a deal
that is set to close in June.

Situated in one of Argentina’s poorest areas, in the far north-west Jujuy province,
the project will extract lithium from brine beneath the desert by evaporating it in
the fierce desert sun. It aims to begin production in the second half of 2020, with
a target of 25,000 tonnes a year of lithium carbonate.
“If you look at the long term the demand is coming,” Ganfeng’s Mr Wang says.
“This year traditional [carmakers] have launched their EV models. So that will
generate demand for sure.”
In the same area as Cauchari is a solar power plant being built by a Chinese
construction company and backed by Import-Export Bank of China. With 1.2m
solar panels it will be the largest solar plant in South America. It will help provide
the energy to pump the brine from beneath the desert. Ganfeng teams on the
ground will have to overcome myriad difficulties, including finding translators who
understand lithium as well as Chinese. Only one other lithium company operates
in the area, Australia-listed Orocobre.
“In this little puna [plateau] at 4,000 metres we’re going to have over 1,000
workers between the solar project and Cauchari and Orocobre,” says John
Kanellitsas, a former investment banker who is executive vice-chairman of New
York-listed Lithium Americas, which is developing the project in Argentina with
Ganfeng.

Qinghai Salt Lake Company, western China, produces potash fertilizers, potassium chloride and
lithium carbonate, among other products © Bloomberg

Across the Andes in Chile, Ganfeng’s rival Tianqi has been expanding its
presence, led by Vivian Wu, a 45-year-old former English teacher who previously
worked for Nokia. Last year Tianqi spent $4.1bn for a 24 per cent stake in SQM,
gaining three seats on its board.
The deal was fiercely opposed by the company’s largest shareholder Julio Ponce
Lerou, Pinochet’s former son-in-law, who lost control over the company last year.
He said it would give Tianqi sensitive information about a rival. Mr Ponce Lerou
filed a lawsuit to block the deal, but it was dismissed in October by Chile’s antitrust
court.
Tianqi’s founder Jiang Weiping got his first big break after he managed to buy a
state-owned lithium plant in Sichuan in 2004 for Rmb11m ($1.6m at today’s
exchange rate). Mr Jiang had been supplying the plant with lithium from Australia.
The local government suggested he take it over to resolve their debts, as it was
close to bankruptcy, according to Ms Wu. Today the plant produces around
17,000 tonnes a year of lithium.
Ganfeng has signed a deal with Volkswagen, which plans to produce 22m EVs in the next 10
years © Reuters

Mr Jiang’s second break came in 2012 when he won a bidding battle against
Rockwood for control of the world’s largest lithium facility, the Greenbushes mine,
which had been in operation since the days of Australia’s gold rush in 1888. It
was like “a snake eating an elephant”, according to one Tianqi employee.
To win the deal Tianqi started to buy up shares of the Canadian-listed company
that owned the mine, Talison Lithium. Then, once it had breached the 10 per cent
threshold for disclosure, Mr Jiang offered a price for Talison that was a 15 per
cent premium to Rockwood’s offer, backed by financing from China’s sovereign
wealth fund.

Tianqi had faced the risk of losing its

key supplier if it had not bought
Greenbushes, according to Ms Wu,
who joined Tianqi in 2009. “We knew
it was something we had have to
grow in a sustainable way.

Recommended

Commodities Lithium poised for recovery,

says Tianqi president

” Tianqi’s deal for SQM has surprised analysts and investors, however, since it
does not give the company a majority stake or control over SQM and has left the
company heavily in debt. Tianqi cannot appoint any of its own employees as
directors, as part of an agreement with Chile’s antitrust regulators.
But Joe Lowry, a lithium consultant who worked for FMC in Asia in the early
2000s, argues that Tianqi is waiting for the day when Mr Ponce Lerou may be
willing to sell. That could give Tianqi a stronger foothold in one of the lowest cost
lithium producers, just as sales of electric cars become mainstream.
Chinese companies will become the “stewards of the overall lithium market”,
according to Mr Jaffe. “Their goal is not to be Chinese players but to be global
players.”

A battery factory in Jiangsu province. China has provided up to half of global investment into
lithium over the past few years, according to FMC © AFP

The rapid spending by Chinese companies has prompted some of the Big Three
producers into action. In November Albemarle agreed to pay $1.15bn for a 50 per
cent share in the Wodgina lithium project in Western Australia.
Paul Graves, a former Goldman Sachs banker who runs Livent, told the FT in
March that he was also keen to acquire more lithium resources in Argentina and
Australia. Livent is one of the key suppliers of lithium hydroxide, the type used by
Tesla, from its Salar del Hombre Muerto project in Argentina.
“If you look at the money that’s gone into lithium over the past few years, it is well
over 50 per cent Chinese,” Mr Lowry says. “But that was open to everybody, this
wasn’t a rigged game. The Big Three as a collective group were too set in their
ways. China is investing ahead of the curve.”
In Xinyu, Ganfeng has plans to move up the value chain into battery production.
At another plant nearby, robots silently assemble sheets of battery materials to
be made into lithium-iron phosphate batteries, the technology used by China’s
electric buses, which are part of the world’s largest fleet.
A Qinghai processing plant. The expansion of China’s lithium sector has been driven by private
businesses sensing an opportunity in batteries for mobile phones and electric cars © Bloomberg

And a 40-minute drive away in Yichun workers handle highly reactive rectangles
of solid lithium metal using gloves inserted into an airtight container full of argon.
Ganfeng is the world’s largest producer of pure lithium metal, a product that is set
to play a key role in solid-state batteries. These next-generation batteries promise
to store significantly more energy for the same weight than current batteries,
helping cars to drive as far as their petrol-powered counterparts on one charge.
Ganfeng is currently testing solid electrolyte batteries for the drone industry but
aims to make its own solid-state lithium metal batteries for electric cars.
Mr Wang, who has just returned from a meeting with Argentine president Mauricio
Macri, says he is still keen on more lithium acquisitions. “But we don’t want to
spend too much money too early,” he adds.
The great battery race Get alerts on Batteries when a new story is published Get alerts Copyright
The Financial Times Limited 2019. All rights reserved.

Ver vdeo descargado

Please use the sharing tools found via the share button at the top or side of articles. Copying
articles to share with others is a breach of FT.com T&Cs and Copyright Policy. Email
licensing@ft.com to buy additional rights. Subscribers may share up to 10 or 20 articles per
month using the gift article service. More information can be found here.
https://www.ft.com/content/455fe41c-7185-11e9-bf5c-6eeb837566c5

Newest | Oldest | Most recommendedKeynes1929 23 minutes agoThis paints a very positive

picture of EV development in China. A contrarian view might be taken in the light of Umicore’s
share price collapse since its profit warning on April 23, An FT article re Umicore said company
“blames China’s electric vehicle market for profits warning. Group says demand has ebbed after
Beijing cut subsidies to local manufacturers” Having invested heavily in China the bumper profits
forecast will now be delayed for 18 months to 2 years. Either they are backing the wrong
technology or EV demand is not progressing as fast as this article
suggests.ReportShare1RecommendReplyClean Power 1 hour agoWhen it comes to energy
storage and the grid, it doesn’t seem wise to put all our eggs in one basket, but rather to have a
diversified portfolio that includes pumped storage hydropower, especially when lithium will in
the near future be one of the most sought-after raw materials on
earth.ReportShare1RecommendReplyS67 25 minutes agoActually splitting funding across lots of
different technologies will only lengthen the time it takes to eradicate fossil fuel
use.ReportShareRecommendReplyPRC1949 1 hour agowhat the hell the 5th pictures posted by
FT? completely discrimination.....do you have any idea what modern China is like? This is a
country with the dominance of the entire electric supply chain
ReportShareRecommendReplyInfraEconomist 3 hours agoAny articles or data around the
carbon/environmental footprint for battery production and life-cycle
impact?ReportShareRecommendReplyHenry Sanderson FT2 hours ago@InfraEconomist
CarbonBrief looked at 17 studies of battery lifecycle emissions; emissions are higher from
batteries produced in Asia, due to use of coal in the grid.
https://www.carbonbrief.org/factcheck-how-electric-vehicles-help-to-tackle-climate-
changeBut I haven't seen good studies on the environmental impact of lithium
extraction/mining. Been told hard rock mining in Australia is three times the carbon footprint of
brine in Chile/Argentina. When the rock is shipped from Australia to China it's at best 6% lithium,
so over 90% is waste material that's shipped to east coast of china.
ReportShare4RecommendReplyHenry Sanderson FT1 hour ago@InfraEconomist This is also the
link to the VW study on the Golf https://www.volkswagen-newsroom.com/en/press-
releases/electric-vehicles-with-lowest-co2-emissions-
4886ReportShareRecommendReplyDuncan 3 hours agoJust as Huawei has done for 5G, so is
Ganfeng following suit, fronts for China to build its leading edge in what are both futuristic global
driving technologies. On these two major fronts, China has caught the West cold and flat
footed.Instead of America and its western allies looking for niche ways to cement their
advantage, they have been busy fighting China on non strategic fronts. Don’t forget China is also
leading in solar energy panel technology as regards efficiency and
effectiveness.ReportShare3RecommendReplymanhandled 3 hours agoThis is why I am waiting
for FCVs.ReportShareRecommendReply-- 3 hours agoAbsolute fantastic article! Highly
recommend Joe Lowry's podcast 'The Global Lithium Podcast'.
http://lithiumpodcast.com/ReportShare4RecommendReplyIndibviduate 3 hours agoAnother
good reason for hydrogen fuel cells vehiclesReportShareRecommendReplyLozza 4 hours agoA
very good article.Thank you Henry.ReportShare2RecommendReplyConsider all before 4 hours
agoAs with many developments in the automotive industry, governments and big companies
look to ensure profit and control over the raw material used in production. Today Lithium is an
important part of this development but that does not mean it will be
tomorrow...https://www.pocket-lint.com/gadgets/news/129004-ryden-dual-carbon-battery-
charges-twenty-times-faster-than-lithium-ion-lasts-longer-due-this-yearI imagine there are
people still holding on to VHS players thinking they will make a come
back?ReportShare3RecommendReplyKaliman 3 hours ago@Consider all before Even if the
technology is there the current battery development will take at least 10-15 years to move on
to the next technology. ReportShare1RecommendReplyConsider all before 3 hours
ago@Kaliman @Consider all before Indeed but in the terms of long term investment I wonder if
pumping money into lithium related companies is a good thing to do? (from an investors point
of view) ReportShareRecommendReplyIngenjoor 4 hours agoThank you Henry for this article
and especially keeping on taking part of the comment section! Would be appreciated if more of
the writers would do the same.