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A new report by the Financial Times argued that one of the leading global battery material producers has cautioned that Chinese firms are refraining from or postponing direct investments in the United States and Europe due to geopolitical concerns and protracted permit approval processes. This warning comes after China’s CNGR Advanced Material announced a $2 billion investment in Morocco.

CNGR Advanced Material of China recently announced its plans to construct a cathode materials facility in Morocco, with the aim of serving the battery markets in the United States and Europe. This unexpected development positions the North African nation as a beneficiary of tensions between the United States and China, as per the report.

Thorsten Lahrs, the CEO of CNGR Europe, Morocco presents an ideal position for Chinese manufacturers seeking to cater to the US and European markets, essentially hitting a strategic "sweet spot."

The #Chinese-#US war extends to more than politics, as the #West collectively tries to catch up with #China's overwhelming dominance over the battery manufacturing industry. pic.twitter.com/Dxa0S5Cynv

— Al Mayadeen English (@MayadeenEnglish) February 1, 2023

Lahrs mentioned that the construction of plants in Morocco can be accomplished at a faster pace than in the intended markets, which entails prolonged permitting procedures. Additionally, investments in Morocco are regarded as lower-risk options, given their adaptability to switch to alternative export destinations in the event of the United States or Europe implementing new protectionist policies.

“Being Chinese means being flexible,” he said as quoted by the Financial Times.

“It takes much more time to get something going in Europe. The context of the US plays a role because of the tension which we have in the game today between China and the US, so it’s de-risking if you don’t go directly to the US,” he added.

The report further acknowledged that Morocco is beginning to experience advantages as a connection point between Chinese firms and Western markets. This comes as nations compete to establish battery industries that will play a crucial role in shaping the future of the automotive and clean energy sectors.

Morocco received an additional boost when LG Chem from South Korea and China's Huayou Cobalt announced their plans to construct a lithium refinery and a plant for cathode materials in the country.
 
Since Morocco maintains a free trade partnership with the United States, the raw materials it supplies contribute to meeting the sourcing requirements essential for electric vehicles sold in the United States. Such compliance allows these vehicles to qualify for subsidies of up to $7,500, as outlined in President Joe Biden's Inflation Reduction Act.

“The IRA is a game-changer for decarbonisation and Chinese companies don’t want to miss this party despite the difficulties directly investing in the US market,” stated Kevin Shang, senior battery analyst at consultancy Wood Mackenzie as quoted by Financial Times.

Morocco, with strong trade ties to Europe, holds a substantial 70% share of the global phosphate reserves. Phosphate is a crucial component in the production of more affordable, lower-range batteries, and China currently dominates the global production of such batteries, the report added.

Indonesia has been the primary nation with abundant battery metal resources that has successfully drawn investments for processing, battery manufacturing, and electric vehicle (EV) factories. However, Morocco presents a favorable pathway for Chinese companies to enter both the US and European markets.

Chinese firms confront the potential threat of exclusion from the US and EU markets. In the United States, legislators are closely examining Ford's proposition to license technology from CATL, the world's leading battery producer, for a plant located in Michigan. Concurrently, the European Union initiated an anti-subsidy investigation into Chinese EVs earlier this month.

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