Chinese lithium firms invest abroad to prepare for AEV demand

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Publish time:12/26/2017 12:00:00 AM Source: CCM
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China’s lithium-related companies went on a shopping spree in worldwide markets throughout 2017, purchasing or investing otherwise in overseas lithium enterprises. Especially lithium mines have been the main target for Chinese investment of Chinese downstream industry, including manufacturers of batteries, alternative energy vehicles, and other lithium-depending high-technology products.

As demand for alternative energy vehicles (AEV) surges, Chinese companies have been doing deals around the world to secure supplies of lithium, a silvery-white metal mined from rocks mainly in Australia and brine pools in South America. The companies are supported by the government, as China has limited lithium resources of its own, so investments abroad are inevitable.

The rush of Chinese firms for worldwide lithium mines is backed up by the news that the Chinese government has recently announced China had started exploring banning the production of petroleum-fueled cars. It has not yet revealed, when the country would implement the ban, but Looking at the rapid growth of China’s electric cars market and similar plans in the UK and France, market experts are estimating the ban to be possible between 2030 and 2040.

According to market intelligence firm CCM, the investing companies can be categorized into three segments, each of which has specific goals for the investment and the business. The first categories are manufacturers of lithium products, including companies like Jiangxi Ganfeng and Sichuan Yahua. The second group are companies that are involved in the production of lithium-ion batteries or alternative energy vehicles, where the new energy giant BYD is to mention. The last group are mining enterprises, which want to exchange their industrial change and competitiveness.

The AEV industry is the largest consumer of lithium in China, as the country has more electric vehicles on its roads than any other country. Furthermore, the country’s lithium-ion battery companies control an estimated 25% of the global supply. Those companies need lithium to continue their production, and questions persist about where it will come from.

In general, the Chinese enterprises aim to acquire adequate raw material, reduce the purchase cost of those, enhance their product profitability and increase resource reserves. Furthermore, these companies are aiming to lay a foundation for their layout of industrial chain and to expand their business by integrating resources.

However, not all of the purchases and investments in recent years turned out to be a success. In some cases, the lithium mines could not provide the high-grade materials that the investors were hoping for, which caused resignation and the sales of unprofitable mines.

Several recent investments

Canada’s Potash Corp., the world’s largest producer of the fertilizer by capacity, confirmed rumours pointing at Chinese firms hoping to buy the miner’s stake in Chilean lithium producer SQM.

Chinese investment firm NextView Capital has paid USD41.4 million for a 20% stake in AIM-listed lithium producer Bacanora Minerals. The Beijing-based company will get guaranteed supply of 5,000 tonnes per year of battery metal lithium at market prices from Bacanora’s project in Mexico when it starts production at the end of 2019.

Great Wall Motor, China’s largest producer of SUVs, will pay USD22 million for a 3.5% stake in Pilbara Minerals. Under the agreement, Great Wall will buy 75,000 metric tons per year of lithium-ion battery-grade lithium carbonate for the next five years.

Following China Molybdenum’s USD1.5 billion purchase of Anglo American’s phosphate and niobium unit, Jilin Jien Nickel Industry Co has had its proposed purchase of RB Energy’s Quebec lithium development approved by a Canadian court.

CCM holds that the enthusiasm for purchasing lithium mines abroad will go on in the future. With less high-quality mines, it is harder to buy. Enterprises in any fields are supposed to have abundant capitals, bright prospect and complete management if they want to invest in lithium mines.

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Chinese lithium firms invest abroad to prepare for AEV demand

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