[ad_1]
Final month, Tesla founder Elon Musk complained that lithium refiners have been “minting cash” and making “software-like margins”.
Near the guts of worldwide lithium processing sits Ganfeng Lithium, a extremely worthwhile Chinese language group that’s pivotal to western automakers’ desires of going electrical, but additionally susceptible to state affect as Beijing tightens its management over strategic sectors.
With clients together with Tesla, BMW and Volkswagen, Ganfeng’s each transfer faces mounting scrutiny. In latest weeks, the group has drawn headlines for an insider trading probe launched by Beijing’s prime securities regulator, its near-$1bn acquisition of lithium mines in Argentina and a subsidiary’s participation in a three way partnership to probe for lithium in Xinjiang, the western area the place China has been accused of human rights abuses.
The raised consideration underlines how the world’s second-largest lithium processor by manufacturing quantity after Chilean rival SQM should maintain Beijing on its facet whereas establishing itself in regional electric vehicle provide chains within the west, analysts mentioned.
“It’s a Chinese language firm present process a worldwide enlargement,” mentioned Sam Jaffe, vice-president of battery storage options at E Supply, a analysis group. “However I feel the state does need to have affect over that firm as a result of they’ve change into so necessary to the lithium-ion battery chain.”
Ganfeng declined to touch upon the insider buying and selling investigation and mentioned it didn’t but have particular exploration plans for Xinjiang.
Based by Li Liangbin in Jiangxi province in 2000, the group has change into one of many world’s most necessary firms for overcoming a bottleneck within the rollout of electrical vehicles: turning uncooked supplies into battery-grade lithium compounds.
Within the first quarter of this yr, Ganfeng’s working revenue jumped nearly eightfold to Rmb4bn ($592mn) on revenues that greater than tripled to Rmb5.4bn, leading to margins of about 75 per cent. Lithium prices have rocketed, multiplying 13 instances in two years to $67,050 per tonne of lithium carbonate in July, based on Benchmark Minerals Intelligence, a pricing company.
Ganfeng’s roots are in chemical processing, however the group, which is dual-listed in Hong Kong and Shenzhen, says its focus is growing mining overseas in Argentina, Mexico, Australia and Mali for uncooked supplies to refine into lithium hydroxide or lithium carbonate.
Its aim of geographical range comes amid rising geopolitical tensions, localisation of EV provide chains and growth of home lithium processing by western nations, components that might restrict the feedstock accessible for Chinese language refiners.
Ganfeng’s meteoric rise to a market capitalisation of $26bn marks a exceptional achievement for Li and enterprise companion Wang Xiaoshen, who have been raised in rural poverty. The pair owns simply over 1 / 4 of the group, based on inventory change filings. Ganfeng declined to touch upon its possession construction.
Alex Payette, chief government of Cercius Group, a China danger consultancy, described Li as a “comparatively low-profile businessman” who has saved Beijing leaders onside. That’s even though “Li and his enterprise undoubtedly benefited” from ties to a few of President Xi Jinping’s political rivals.
“Given the strategic significance of lithium in China and the sheer measurement of Ganfeng Lithium’s market place, the [Chinese Communist] get together would have a vested curiosity in sustaining the established order with Li insofar as he doesn’t step out of bounds,” Payette mentioned.
Trade insiders praised the founders’ imaginative and prescient. Some name Li the “rain man” for his potential to learn the market and make counterintuitive bets, together with delivery brine — from which lithium might be extracted — from Chile to China to chop prices.
“Ganfeng foresaw the mineral scarcity and began investing aggressively a few years in the past,” says Susan Zou, battery supplies analyst at analysis firm Rystad Power.
When lithium costs slumped in 2019, the corporate saved investing, mentioned John Kanellitsas, government vice-chair of Lithium Americas, of which Ganfeng owns 20 per cent. “There was no wavering of their imaginative and prescient,” he mentioned.
Regardless of the obvious neutrality and affability of the founders, Ganfeng faces the creeping affect of an more and more authoritarian Beijing.
Joe Lowry, a former provider to Ganfeng by US chemical group FMC and pal of Li and Wang, mentioned: “Ganfeng protecting its independence is perhaps a difficulty. It is determined by how the Chinese language authorities views its battery and electrical automobiles ambitions.”
Analysts mentioned there’s a rising danger that Beijing asks Ganfeng to prioritise Chinese language EV makers if the lithium scarcity deepens in coming years. Some even prompt a big state-owned mining group similar to Zijin Mining may very well be directed to take over Ganfeng.
However executives at Ganfeng’s enterprise companions argued it’d thrive even when Beijing tightened the screw. “For Ganfeng, limiting the circulation of fabric out of China would create a possibility as they’re growing chemical processing globally, the place the Chinese language authorities doesn’t have jurisdiction,” mentioned one.
The Chinese language authorities’s predominant gripe with the lithium sector has been the chance the worth rise dents the marketplace for electrical vehicles, mentioned Daisy Jennings-Grey, an analyst at Benchmark Minerals Intelligence.
Ganfeng mentioned useful resource shortages and worth spikes have been principally attributable to the “mismatch between provide and demand” and that the very best answer was “accelerating exploration and growth of upstream sources”.
Nevertheless, the west’s more and more hawkish view of China has already brought about issues for the corporate. Vancouver-based Lithium Americas is contemplating spinning off a Nevada challenge as an unbiased firm, doubtlessly ridding it of Chinese language possession and easing its entry to US authorities help. Mexico, the place Ganfeng is growing a challenge, has moved to nationalise lithium assets.
Such pressures are set to accentuate. The local weather change invoice handed by the US Congress final week might goal Chinese language teams by requiring a threshold of uncooked supplies in batteries to be extracted, processed or recycled within the US or by a free commerce settlement companion.
Lowry mentioned Ganfeng would discover it more and more troublesome to navigate between growing hostility in direction of Chinese language firms within the west and assembly calls for from Beijing.
“Ganfeng goes to be treading a high-quality line,” he mentioned.
Extra reporting by Maiqi Ding in Beijing