Sources believe that the move could build a new supply chain route for companies facing trade restrictions.
Starting this year, the precursor plant is anticipated to complete construction in 2024, with annual capacity designed to meet at least 43,000 tonnes, with an eventual planned capacity of more than 100,000 tonnes, GEM said in a filing to Shenzhen exchange.
“This would help us to grapple with the external trade restrictions from the US and the European Union… and to better serve the booming renewable energy demand in the global market,” the company said on Friday March 24.
While the US Inflation Reduction Act (IRA) has sparked market concerns about fracturing electric vehicle (EV) supply chains on a more regionally focused basis, GEM’s move overseas represents how companies along the chains could successfully qualify for tax credits under the US climate investment.
Hyper-rich nickel precursor produced from the precursor plant will serve CAM, a joint venture cathode maker. This is set up by the South Korean producers SK on and Ecopro in the US, according to GEM.
The JV’s precursor production will feed on nickel mixed hydroxide precipitate (MHP) produced by another joint venture comprising three Indonesian companies. It is expected to produce an MHP equivalent of around 30,000 tonnes per nickel unit annually, and is set to begin in Q3 2024.
Under the terms of the agreement, GEM will hold a stake of no more than 49.0% in the joint venture, while SK on and ECOPRO will hold stakes of no less than 25.5% respectively. Shareholding may be adjusted to meet the conditions for IRA’s tax credit, GEM said.
The IRA, which was introduced in August, offers tax credits of up to $75,00 for EV purchases, where at least 80% of the lithium, cobalt, nickel, and manganese used in their construction has been extracted and processed in the US - or in a country with which it has a free-trade agreement. More detailed guidance will be issued by March 31.
The goal is to encourage mining and manufacturing in the US while moving key minerals’ supply away from non-free trade partners, including China.
On March 16, the European Union unfolded its Critical Raw Materials Act to reduce reliance on countries such as China.
China still commands dominant market share in global EV mineral supplies. With neighboring counterparts Japan and South Korea pushed to cut ties with Chinese suppliers under the IRA, the leading metal producer has also been exploring an entryway into the US market.
In February this year, Chinese battery giant CATL announced their partnership with Ford in building a battery plant in Michigan, where the producer will provide Ford with lower-cost technology pioneered In China.
Market participants believed the “substitution of technology for the order book” has offered a way for Chinese battery makers to tap the US market, though some are not sure if this is a sustainable move.
Chinese battery materials market faces downward pressure
To add to market woes, domestic battery metals in the top-consuming country also faced downward price pressure after China discontinued its EV subsidies for buyers at the end of 2023.
Fastmarkets’ price assessment for cobalt sulfate 20.5% Co basis, exw China was 39,000-41,000 yuan ($5,661-5,952) per tonne on Wednesday March 29, down by 1,000-2,000 yuan per tonne from 41,000-42,000 yuan per tonne last Friday, and more than two-thirds slashed down from its 120,000 yuan per tonne peak one year ago.
Fastmarkets’ weekly price assessment for nickel sulfate min 21%, max 22.5%; cobalt 10ppm max, exw China was 36,500-37,500 yuan per tonne on Friday, down 1.33% from 37,000-38,000 yuan per tonne on March 17. Sulfate prices in China have fallen steadily since February 24, when they were 39,000-40,000 yuan per tonne.
Both nickel sulfate and cobalt sulfate are key components in nickel-cobalt-manganese (NMC) batteries to power EVs, which are preferred over the lithium iron phosphate (LFP) batteries, especially in the international market due to the former’s higher energy density.
There has been increasing demand for pricing transparency when it comes to nickel products. Fastmarkets increased the frequency of its nickel sulfate pricing in October 2022; prices were originally launched in April 2021.
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