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French mining group Eramet has blamed a lack of EU funding for critical minerals for having pushed it into a deepening partnership with China’s Tsingshan, the world’s largest stainless steel producer, which was behind the nickel market blow-up last year.
The 143-year-old company, which is 27 per cent owned by the French state, has partnered with the controversial Chinese group in Indonesia on a vast nickel project and opted to branch out into lithium in Argentina together.
However, Pierre-Alain Gautier, director of corporate affairs and partnerships at Eramet, told the Financial Times that EU support for mining companies would have eliminated the need to further its partnership with Tsingshan to develop critical resources for electric car batteries.
“We were looking for [the EU] as we suffered from a lack of financing to develop our projects,” he said. “It’s because of the lack of financial support from Europe that we further developed our partnership with Tsingshan.”
Despite the EU proposing multiple programmes to help fund the development of critical raw materials, European mining groups say support is lagging behind that provided in the US, Canada and Australia as the west tries to muster a response to China’s model of state-backed finance.
This week, Eramet announced that it has signed a $400mn pre-financing deal with Glencore to jointly market 50,000 tonnes of lithium carbonate from its project with Tsingshan in Argentina over an unspecified period.
Aiming to start production in the second quarter of 2024, the project will generate 24,000 tonnes a year, potentially rising to 75,000 tonnes in a second stage.
The deal is the Swiss commodity trader’s first involving mined lithium supplies, plugging a hole in its portfolio as it aims to supply all the main minerals car and battery makers require to build an EV.
Eramet’s partnership with Tsingshan has come under little public scrutiny by French and EU policymakers, despite the wrong-way bet by Xiang Guangda’s company on nickel prices that caused an unprecedented price surge and cancellation of billions of dollars worth of trades last year.
The French company, whose net income fell 86 per cent in the first half of the year to €98mn on €1.9bn of revenue, mothballed its Indonesian Weda Bay nickel project before choosing Tsingshan in 2017 as the partner to resuscitate it.
Four years later, that partnership was further cemented by pursuing joint development of a lithium project in Argentina in which the Chinese group takes a 49.9 per cent stake.
European policymakers have put in place multiple programmes aimed at increasing funding for crucial mining projects and technologies, including the Critical Raw Materials Act in March and the recently announced Step investment platform. However, executives have lamented the slow pace of legislative procedures and a lack of fresh money on offer.
“We have now this awareness from Europe that they need to align with this new benchmark in terms of financial support,” said Gautier, referring to support for critical minerals in Canada and the US via its flagship Inflation Reduction Act.
“We need loans, equity participation and all the funding instruments we can get. We have some years from now and 2026 to take market share. We need to reorient critical minerals policy of financial institutions including the European Bank for Reconstruction and Development.”
EU state aid rules have been vastly loosened to give national governments more bandwidth to support industries through subsidies and tax credits, something France has been leading the charge on with a €2bn public-private critical minerals fund in the making.
The European Commission said that almost €900mn had been made available through its science and research programme Horizon Europe for critical raw materials projects and that there were nine other potential funding instruments that aimed to support “the development of a sustainable critical raw material value chain in Europe”.
Tsingshan has been pivotal to the vast transformation of Indonesia’s rise to a global resources powerhouse and the nickel market from fears of shortages to glut in just years through astonishing metallurgical innovation.
