China exploits markets for $10 billion to boost clean technology supremacy
Three Chinese manufacturers of electric car batteries and materials are wooing investors for more than $10 billion in new financing as the country cements its dominance of global clean technology supply chains.
Contemporary Chinese company Amperex Technology, the world’s largest battery maker, this week concluded its second largest deal on the global capital market this year, as a wave of battery and rare earth companies scrambled to meet rising demand.
Fundraising by the three Chinese groups – CATL, Tianqi Lithium and Huayou Cobalt – has exceeded hundreds of millions of dollars spent by Washington and US allies including Australia and South Korea to undermine China’s supremacy in this sector.
“China is trying to position itself as Saudi Arabia for clean technology devices, being the least expensive supplier and achieving the highest market share,” said Neil Beveridge, senior analyst at Bernstein in Hong Kong. “This is a massive geostrategic competition between China and the West.”
Factories in China account for nearly three-quarters of global electric car battery production and control 90 per cent of the market share to process rare earth elements — the oxides, metals and magnets used in batteries — a level of dominance similar to its stronghold on solar power. industry.
CATL, a major supplier to Tesla and local Chinese automakers like Geely, launched a 45 billion renminbi ($6.7 billion) private placement last week, at 410 renminbi per share on Wednesday. Including the latest massive stock sale, CATL has raised about $13 billion since its Shenzhen listing in 2018, according to Financial Times calculations and Refinitiv data.
Foreign investors were keen to participate. JPMorgan, Barclays, Morgan Stanley, Macquarie and HSBC each acquired a portion of the share sale, representing about 32 percent of the total shares offered.
Shenzhen-listed Tianqi Lithium, one of the world’s largest producers of lithium chemicals for electric car batteries, aims to raise between $1 billion and $2 billion in a secondary listing in Hong Kong, according to an investor close to the company.
The fundraiser will be the largest stock exchange in Hong Kong this year, even at the lowest scale, according to Dealogic. Mainland shares in Tianqi are up more than 21 percent since the beginning of June.
Hong Kong-listed Huayou Cobalt, another large Chinese supplier of raw materials, plans to raise up to 17.7 billion RMB via a private alternative. Most of the cash will be used to expand production at its joint venture in Indonesia, where it processes nickel, an important material for electric car batteries.
More than 90 percent of the world’s battery lithium is produced from refineries in China, which also process the vast majority of cobalt, nickel, and other important battery materials, according to Trafigura.
The West has been slow to respond to China’s dominance of the market. This month, the US Department of Defense signed a $120 million deal with Australia-listed Lynas Rare Earths to build one of America’s first heavy rare earth separation facilities. In February, the Australian government provided a $100 million loan to Hastings Technology Materials to develop a rare earth mine and refinery in Western Australia.
As demand for electric vehicles grows, global battery capacity is expected to increase 40 percent annually through 2025, to 3,252 gigawatt-hours from 823 gigawatt-hours in 2021, according to Bernstein’s forecast. The market share of electric car battery capacity in China will decline slightly as the United States and Europe provide generous subsidies to build factories closer to automakers, but it is expected to remain at about two-thirds by 2025.
The European footprint is expected to expand to 20 percent from 15 percent today, and the United States to 12 percent from 8 percent. CATL is expected to maintain a global market share of 20 percent through 2025.
However, the cost advantage is set to improve in China. The unit cost of the factories built in China is about $60 million/GWh, thanks to their size. But it will shrink further, to about $50 million/GWh in the coming years as the size of the plants expands rapidly.
This compares to a global average of about $78 million/GWh over the next 10 years. New European battery plants are already costing $120 million/GWh.
Ross Gregory, of consultancy New Electric Partners, said competitors’ concerns about Chinese rivals have gone beyond geopolitical risks to the difficulties of competing with the country’s massive domestic demand for electric car batteries.
“It’s not the fear that China might act outrageously, it’s simply the fact that they have huge domestic demand,” Gregory said.
South Korean companies, including CATL rivals LG, SK and Samsung, are racing to reduce reliance on China for critical battery materials, from a level of more than 60 percent today.
But in a sign of the allure of cheap batteries in China, Hyundai Motor Group’s Kia brand plans to use CATL batteries in a new EV model, marking the first entry of non-Korean-made batteries into the domestic market.
Additional reporting by Song Joong A in Seoul and Neil Hyom in London
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