The PRC’s Rare Earths Squeeze…(UPDATE: Manchin’s “Build Back Better” Veto Should Save Ontario Autos Industry)

…especially with all those electric vehicles and their batteries in mind.

(Caption for photo at top of the post: “The minerals China is buying are indispensable for the manufacture of high-tech products such as electric motors, mobile phones, wind turbines, hard disk drives and LEDs.TOBY MELVILLE/Reuters”.)

Further to tweets below,

excerpts from an opinion piece in the Globe and Mail (in the business section, not the main news one):

China is buying up the critical green-revolution minerals sector in Canada and elsewhere. Enough already

Eric Reguly European bureau chief Rome

A week ago, the shareholders of Canada’s Neo Lithium approved the sale of the TSX Venture Exchange-listed company to China’s Zijin Mining for about $960-million. The announcement received little coverage and appears to have bothered almost no one in the federal government. It should have.

While Neo Lithium is hardly a household name, and the company is relatively small, its purchase should have raised a stink not just in Ottawa but in Washington and among North America’s electric-car makers. That’s because lithium is an essential component of the batteries that power electric vehicles (EVs), a suddenly burgeoning market, and vast amounts of the global supply of the light, silvery-white metal are going to Chinese companies.China has been quietly buying lithium producers and deposits around the world for years and is also going after cobalt, another vital component of car batteries, and rare earths, a group of 17 specialty metals that are indispensable for the manufacture of high-tech products such as electric motors, mobile phones, wind turbines, hard disk drives and LEDs.

*Trudeau presses for Canada to become a critical mineral powerhouse

By all accounts, it has a strong lead in these metals, leaving North American and European companies to play catch up – if they can. Only recently have Western governments realized the mistakes they made by not insisting years ago on the careful screening of foreign takeover attempts in this industry [emphasis added]

…In lithium-ion battery cell manufacturing, China’s global share is 80 per cent, and its lithium refining capacity is estimated at 60 per cent. It controls about half the value chain for wind turbines, including their blades, generators and gearboxes.

While China is a mining powerhouse on the home front, its domestic reserves are insufficient to feed its manufacturers. So it has gone abroad to find the raw materials.

It has invested heavily in the Democratic Republic of the Congo, home of almost two-thirds of the world’s cobalt supplies [see this post: “Congo’s Cobalt Key to PRC’s Grasp for EV Dominance“], and accounts for more than 70 per cent of cobalt refining capacity…

China’s plan on the critical metals front has been called the “apple seed strategy”: It plants a lot of seeds around the world in small companies and projects with big long-term potential, even if it recognizes that some of them could go nowhere. Zijin Mining’s purchase of Neo Lithium, which bills itself as “The Next Major Lithium Producer,” was part of that strategy. The Canadian company’s vast lithium project is located in northwestern Argentina, near the Chilean border [emphasis added].

China is going after U.S. lithium companies, too. But the United States is starting to see a backlash against acquisitive Chinese companies, partly because President Joe Biden is making EVs central to his climate-change agenda…

Lithium Americas, which trades in New York and Toronto, won an international bidding war for Canada’s Millennial Lithium. The war started in July, when China’s Gangfeng Lithium, one of the world’s top producers, bid for a stake in Millennial. Chinese battery giant CATL joined the bidding a few months later. In the end…[Lithium Americas] beat its Chinese rivals for the prize [see 2/ at tweets above].

But no one saved Neo Lithium from a Chinese takeover, though it’s possible the deal could still be blocked by Ottawa [emphasis added]. All the proposed takeovers of lithium companies and others that produce essential metals for the green revolution need to be reviewed, regardless of size. Only now is the government of Prime Minister Justin Trudeau waking up to the threat of handing China the keys to the next industrial revolution and job-creation machine.

Mr. Trudeau wants to make Canada a global leader in EV battery production…

Good luck with that, given the not exactly spectacular performance of Canadian higher-tech industrial companies of late, our lack of attractiveness for such foreign investment, and the Biden administration’s “Buy American” approach. But of course the feds and Ontario (Quebec?) will offer oodles of subsidies to investors, I am certain. Some relevant posts:

PM Trudeau’s Government Waking up to Need carefully to Review more foreign Investment

Biden Admin/Democrats’ “Buy American” Legislation could Kill Efforts to Build Electric Vehicles Industry in Ontario (note UPDATE)

Premier Ford Touts Ontario EVs; Biden’s “Build Back Better” Bill would Kill Canadian Autos

The EV Age, or, the Dream of Ontario Assembly Plants for them and their Batteries

EV Subsidies: Will US Senate or Biden Admin. Care about Canadian Retaliatory Threats?

UPDATE: CNET Road Show story:

EV tax credits: Manchin a no on Build Back Better bill, putting $12,500 incentive in doubt

If there is a further effort to pass the subsidies for US-assembled EVs only in a “regular order” bill subject to the Senate veto I can’t see there being enough Republican votes to get to 60. So PM Trudeau’s government, having made its concerns well-known publicly (and thus also played to Canadians), should now just stay quiet and avoid upsetting the Biden administration and chancing bilateral relations in other areas (see the F-35 and the RCAF’s new fighter–no need to weaponize the procurement). Accept victory quietly and gracefully.

Mark Collins

Twitter: @Mark3ds

7 thoughts on “The PRC’s Rare Earths Squeeze…(UPDATE: Manchin’s “Build Back Better” Veto Should Save Ontario Autos Industry)”

  1. Major NY Times’ story on PRC’s world-leading batteries maker, CATL–how might plants in Canada, if set up, actually compete?

    Mark Collins

    Like

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s