The China Signal - August 26
Great Wall enters Brazil, Argentina seeks China-backed nuclear power plant, Argentine activists protest against planned pork deal, Ganfeng Lithium moves in on Bacanora Lithium acquisition
G’day, and welcome to The China Signal! This week, Great Wall enters Brazil with the purchase of Daimler’s factory in Sao Paulo state; Argentina pursue’s a Chinese financed and built nuclear plant, Argentine activists protest against a long-planned pork deal with China; and Bacanora Lithium agrees to a cash offer from Ganfeng Lithium. Read on.
Auto
Brazil 🇧🇷
UPDATE 1-Great Wall enters Brazil with purchase of Daimler factory | Reuters - August 18, 2021
Daimler AG has sold a factory in Brazil to China’s Great Wall Motor Co Ltd for an undisclosed sum, the companies said on Wednesday, marking the Chinese manufacturer’s arrival in Latin America’s largest economy.
Baoding-based Great Wall, China’s top pickup-truck maker which also builds vehicles in Russia and Thailand, in a separate statement said it would revamp the factory to have an annual production capacity of 100,000 vehicles.
German premium automaker Daimler had said in December it would wind down car production in Brazil, shutting down a factory dedicated to producing Mercedes Benz luxury vehicles since 2016 in the city of Iracemapolis in Sao Paulo state.
The Mercedes plant had opened when Brazilian industrial policy forced several automakers to open plants if they wanted to sell big volumes locally, leading to overcapacity as demand has recovered slowly from a deep downturn.
Daimler said in December that a drop in sales of luxury cars during the COVID-19 pandemic had made it unsustainable to keep the factory open.
Nuclear Power
Argentina 🇦🇷
Argentina seeks new China-backed nuclear power plant - Diálogo Chino - August 20, 2021
Construction of the new nuclear plant would start next year, be ready by 2028 at a cost of US$8 billion, 85% of which would be financed by Chinese banks.
The nuclear deal is in line with Argentina's 'comprehensive strategic alliance' with China, a high diplomatic status that China reserves for only a few countries. Fernández sees China as a strategic ally in multiple sectors beyond nuclear, and health cooperation during the Covid-19 pandemic has strengthened ties.
The agreement with Argentina is one of the Chinese nuclear industry’s first successes abroad. In 2014, China's Hualong reactor passed the International Atomic Energy Agency's safety review. It runs on enriched uranium, unlike the CANDU which runs on natural uranium.
The Chinese nuclear power plant is a turnkey project, meaning it will design, build and equip the plant. But it will use around 40% local components, the same as Atucha I, when Argentina was only beginning to develop nuclear energy. The government is relying on being able to manufacture the enriched uranium that will be necessary for the plant's operation.
At a cost of approximately US$8 billion Argentina will take out a loan from the Industrial and Commercial Bank of China (ICBC) to finance 85% of the project. The rest will be financed by the government. Antunez expects the contract to be finalised by mid-2022, at which time construction in Buenos Aires province is expected to begin immediately.
Agriculture
Argentina 🇦🇷
Argentina activists protest China pork export deal - Associated Press - August 26, 2021
Animal rights activists protested Wednesday in Buenos Aires against a possible agreement with China to install mega pig farms in the country.
The treaty negotiation between the two countries considers more than twenty farms in different Argentine provinces to breed pigs and produce 900,000 tons of pork in four years. The Asian giant has been affected by African swine fever, which forced the slaughter of millions of pigs in its territory.
The government of Alberto Fernández announced in mid-2020 that there were talks with China to move forward with this initiative, which would bring the South American country millions in foreign currency. Amid strong opposition from environmentalists and part of the scientific community, the Argentine foreign ministry reported that the signing of the agreement would be suspended until at least November [2020] to bring it into line with regulations on environmental protection, natural resources and biosafety.
Critical Minerals
Mexico 🇲🇽
China’s biggest lithium group seals deal for UK-listed Bacanora - Financial Times - August 25, 2021
UK-listed Bacanora Lithium has agreed to a cash offer valuing it at £284.8m from China’s Ganfeng Lithium, in a deal that hands China’s largest lithium producer control over a mine in Mexico. Ganfeng said it had secured a letter of support from Bacanora’s second-largest shareholder, M&G, which owns 14 per cent of the company.
Ganfeng, which needs 50 per cent of shareholders to support the deal, already owns a 29 per cent stake in Bacanora. The 67.5p a share offer had been opposed when first announced in early May.
The takeover will be the latest acquisition for Ganfeng Lithium, which is the largest listed producer of lithium in the world, following an 86 per cent rally in its shares this year.
Last month, Ganfeng paid C$343m for Canada’s Millennial Lithium, which has a project in Argentina. In June, it also paid $130m for a 50 per cent stake in the Goulamina lithium mine in Mali.
Bacanora owns the Sonora Lithium project in Mexico, which is set to start production in 2023. Situated 170km south of the US border, it is well positioned to supply the US automotive market.
I first mentioned this deal in TCS May 24. I also noted in TCS July 2 how Ganfeng Lithium signed an MOU with Argentina to produce Lithium batteries, acquired a 35% interest in the Sal de la Puna lithium brine project in Argentina, and announced a $600 million investment into a lithium exploration project in TCS June 18.