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  3.         Last month, Tesla founder Elon Musk complained that lithium refiners were “minting money” and making “software-like margins”.
  5. Close to the heart of global lithium processing sits Ganfeng Lithium, a highly profitable Chinese group that is pivotal to western automakers’ dreams of going electric, but also vulnerable to state influence as Beijing tightens its control over strategic sectors.
  7. With customers including Tesla, BMW and Volkswagen, Ganfeng’s every move faces mounting scrutiny. In recent weeks, the group has drawn headlines for an insider trading probe launched by Beijing’s top securities regulator, its near-$1bn acquisition of lithium mines in Argentina and a subsidiary’s participation in a joint venture to explore for lithium in Xinjiang, the western region where China has been accused of human rights abuses.
  9. The raised attention underlines how the world’s second-largest lithium processor by production volume after Chilean rival SQM must keep Beijing on its side while establishing itself in regional electric vehicle supply chains in the west, analysts said.
  11. “It’s a Chinese company undergoing a global expansion,” said Sam Jaffe, vice-president of battery storage solutions at E Source, a research group. “But I think the state does want to have influence over that company because they have become so important to the lithium-ion battery chain.”
  13. Ganfeng declined to comment on the insider trading investigation and said it did not yet have specific exploration plans for Xinjiang.
  16. Founded by Li Liangbin in Jiangxi province in 2000, the group has become one of the world’s most important companies for overcoming a bottleneck in the rollout of electric cars: turning raw materials into battery-grade lithium compounds.
  18. In the first quarter of this year, Ganfeng’s operating profit jumped almost eightfold to Rmb4bn ($592mn) on revenues that more than tripled to Rmb5.4bn, resulting in margins of about 75 per cent. Lithium prices have rocketed, multiplying 13 times in two years to $67,050 per tonne of lithium carbonate in July, according to Benchmark Minerals Intelligence, a pricing agency.
  20. Ganfeng’s roots are in chemical processing, but the group, which is dual-listed in Hong Kong and Shenzhen, says its focus is developing mining overseas in Argentina, Mexico, Australia and Mali for raw materials to refine into lithium hydroxide or lithium carbonate.
  22. Its goal of geographical diversity comes amid rising geopolitical tensions, localisation of EV supply chains and development of domestic lithium processing by western nations, factors that could limit the feedstock available for Chinese refiners.
  24. Ganfeng’s meteoric rise to a market capitalisation of $26bn marks a remarkable achievement for Li and business partner Wang Xiaoshen, who were raised in rural poverty. The pair owns just over a quarter of the group, according to stock exchange filings. Ganfeng declined to comment on its ownership structure.
  27. Alex Payette, chief executive of Cercius Group, a China risk consultancy, described Li as a “relatively low-profile businessman” who has kept Beijing leaders onside. That is despite the fact that “Li and his business undoubtedly benefited” from ties to some of President Xi Jinping’s political rivals.
  29. “Given the strategic importance of lithium in China and the sheer size of Ganfeng Lithium’s market position, the [Chinese Communist] party would have a vested interest in maintaining the status quo with Li insofar as he does not step out of bounds,” Payette said.
  31. Industry insiders praised the founders’ vision. Some call Li the “rain man” for his ability to read the market and make counterintuitive bets, including shipping brine — from which lithium can be extracted — from Chile to China to cut costs.
  33. “Ganfeng foresaw the mineral shortage and started investing aggressively many years ago,” says Susan Zou, battery materials analyst at research company Rystad Energy.
  36. Li Liangbin, right, poses during the ceremony for Ganfeng’s Hong Kong listing in 2018 © Imagine China/Oriental Image/Reuters
  37. When lithium prices slumped in 2019, the company kept investing, said John Kanellitsas, executive vice-chair of Lithium Americas, of which Ganfeng owns 20 per cent. “There was no wavering of their vision,” he said.
  39. Despite the apparent neutrality and affability of the founders, Ganfeng faces the creeping influence of an increasingly authoritarian Beijing.
  41. Joe Lowry, a former supplier to Ganfeng through US chemical group FMC and friend of Li and Wang, said: “Ganfeng keeping its independence might be an issue. It depends on how the Chinese government views its battery and electric vehicles ambitions.”
  43. Analysts said there is a growing risk that Beijing asks Ganfeng to prioritise Chinese EV makers if the lithium shortage deepens in coming years. Some even suggested a large state-owned mining group such as Zijin Mining could be directed to take over Ganfeng.
  45. But executives at Ganfeng’s business partners argued it might thrive even if Beijing tightened the screw. “For Ganfeng, limiting the flow of material out of China would create an opportunity as they are developing chemical processing globally, where the Chinese government doesn’t have jurisdiction,” said one.
  47. The Chinese government’s main gripe with the lithium sector has been the risk the price rise dents the market for electric cars, said Daisy Jennings-Gray, an analyst at Benchmark Minerals Intelligence.
  49. Ganfeng said resource shortages and price spikes were mostly caused by the “mismatch between supply and demand” and that the best solution was “accelerating exploration and development of upstream resources”.
  51. However, the west’s increasingly hawkish view of China has already caused complications for the company. Vancouver-based Lithium Americas is considering spinning off a Nevada project as an independent company, potentially ridding it of Chinese ownership and easing its access to US government support. Mexico, where Ganfeng is developing a project, has moved to nationalise lithium assets.
  53. Such pressures are set to intensify. The climate change bill passed by the US Congress last week could target Chinese groups by requiring a threshold of raw materials in batteries to be extracted, processed or recycled in the US or by a free trade agreement partner.
  55. Lowry said Ganfeng would find it increasingly difficult to navigate between increasing hostility towards Chinese companies in th

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