France’s Eramet blames lack of EU funds for deeper partnership with Chinese
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The absence of financial support from the European Union for vital minerals has been identified by French mining company Eramet as the reason behind its escalating collaboration with Tsingshan, the largest stainless steel manufacturer globally. Tsingshan's actions caused a significant disruption in the nickel market in the previous year.
The company, which has been in existence for 143 years and has a 27 percent ownership by the French government, has formed an alliance with the contentious Chinese organization in Indonesia for an extensive project involving nickel. Additionally, they have decided to expand their operations into lithium in Argentina alongside the same Chinese group.
Nonetheless, Pierre-Alain Gautier, the individual responsible for corporate affairs and collaborations at Eramet, stated to the Financial Times that if the EU had provided assistance to mining firms, there would have been no necessity to extend their partnership with Tsingshan in order to progress the production of essential resources for electric vehicle batteries.
"We were actively seeking the European Union because we were facing a shortage of funds to advance our projects," he remarked. "Due to the insufficient financial backing from Europe, we decided to deepen our collaboration with Tsingshan."
In spite of the European Union putting forth various initiatives to support the financing of essential raw materials' development, European mining companies claim that the assistance they receive is not on par with the aid provided in the United States, Canada, and Australia. This disparity arises as the western nations aim to formulate a collective response to China's approach of backing financial initiatives through state interventions.
This week, Eramet revealed that it has entered into a pre-financing agreement worth $400 million with Glencore. The purpose of this agreement is to collaborate with Glencore in the joint marketing of 50,000 tonnes of lithium carbonate. The source of this lithium carbonate is Eramet's project with Tsingshan in Argentina. The duration of the marketing venture remains undisclosed.
With plans to commence manufacturing during the second quarter of 2024, the endeavor aims to produce 24,000 metric tons annually, with the possibility of increasing to 75,000 metric tons in a subsequent phase.
This transaction marks the initial agreement for the Swiss trader in terms of procuring extracted lithium resources. It fills a vacant area in their range of products, as their objective is to provide all the essential minerals necessary for the production of electric vehicles utilized by car and battery manufacturers.
Eramet's collaboration with Tsingshan has received limited attention from French and EU decision-makers, despite the ill-advised wager made by Xiang Guangda's firm on nickel prices. This unfortunate gamble led to an unparalleled surge in prices and the cancellation of trades worth billions of dollars in the previous year.
The French corporation, which experienced a drastic decline of 86% in its earnings during the first six months of the year, amounting to €98 million in revenue out of a total of €1.9 billion, decided to put its Indonesian Weda Bay nickel project on hold. Eventually, in 2017, it opted to revive the project in collaboration with Tsingshan.
After four years, the collaboration was strengthened even more when they decided to work together on developing a lithium project in Argentina. In this project, the Chinese group acquired a 49.9 percent ownership share.
European policymakers have implemented various initiatives to boost funding for important mining projects and technologies. These include the recent enactment of the Critical Raw Materials Act and the introduction of the Step investment platform. Nevertheless, industry leaders have expressed their dissatisfaction with the sluggish legislative procedures and the scarcity of new funds available.
Gautier mentioned that Europe has recognized the need to synchronize with the latest standard in terms of financial assistance. This pertains specifically to the support provided for crucial minerals in Canada and the US, through the implementation of their flagship initiative, the Inflation Reduction Act.
"We require financial assistance in the form of loans, equity participation, and any available funding methods. We have a few years ahead of us, until 2026, to expand our market presence. It is imperative that we reshape the crucial minerals policy within financial organizations, such as the European Bank for Reconstruction and Development."
The regulations regarding state aid in the European Union have been significantly relaxed, allowing national governments to possess greater flexibility in providing assistance to industries through subsidies and tax credits. France, in particular, has taken the lead in this endeavor by establishing a substantial €2 billion public-private fund specifically dedicated to critical minerals.
The European Commission announced that approximately €900mn has been allocated under its science and research initiative, Horizon Europe, for projects related to essential raw materials. Additionally, there are nine alternative funding mechanisms intended to assist in the establishment of a sustainable value chain for critical raw materials within Europe.
Tsingshan has played a crucial role in Indonesia's remarkable journey towards becoming a major player in the global resources industry. With their groundbreaking advancements in metallurgy, they have effectively turned the nickel market around from a state of scarcity to an overabundance within a few short years.
