Chinese companies pivot investments towards Morocco to reach Western markets

Chinese companies pivot investments towards Morocco to reach Western markets

Morocco and China have long enjoyed strong and perpetual relations, marked by significant economic cooperation, despite Morocco’s equally positive relations with the United States.

This week, British Financial Times newspaper claims that the US-China conflict is bringing big gains for Morocco, after the Kingdom became a link for Chinese companies wishing to serve European and American markets.

Morocco is gaining ground as a perfect partner for China’s “de-risking” strategy thanks to its strategic location, skilled workforce and exemplary competitiveness with high-quality infrastructure.

China’s companies are avoiding or delaying direct investments in the USA and Europe due to geopolitics and long delays in obtaining permits, warned one of the world’s largest producers of battery materials after announcing a $2 billion investment in Morocco.

China’s CNGR Advanced Material recently said it would build a cathode materials plant in the Kingdom to supply the US and European battery markets.

Thorsten Lahrs, Managing Director of CNGR Europe, told the FT that Morocco represented an “ideal point” for Chinese producers looking to serve the US and Europe.

Founded in 2014, Shenzhen-listed CNGR is the world’s largest supplier of nickel-based cathodes, one of the main building blocks of a battery, with a global market share of 23%. Its customers include Tesla, CATL and LG Chem.

He said the plants could be built faster in the Kingdom than in target markets, where approval processes are lengthy, and represented a less risky investment prospect, as they could export elsewhere if the US or Europe introduced new protectionist policies.

Last year, Rabat and Beijing signed a “joint implementation plan” for economic projects as part of China’s “Belt and Road” initiative, which aims to strengthen the Asian giant’s economic presence in Morocco.

The agreement aims to “improve access to Chinese financing (…) to implement major projects in the country”, and “the Chinese government is committed to encouraging major Chinese companies to set up or invest in the Kingdom”.

In 2017, Morocco joined the Initiative launched by Chinese President Xi Jinping in 2013.

The latter calls for the construction of a land belt linking China, the world’s second largest economy, to Western Europe via Central Asia and Russia, as well as a sea route to reach Africa and Europe via the China Sea and the Indian Ocean.

Being Chinese means being flexible, added CNGR Europe’s Managing Director to the FT. “It takes a lot longer to get things done in Europe. The U.S. context plays a role because of the tension that exists today between China and the U.S., so it’s less risky not to approach the U.S. directly.”

Morocco is beginning to benefit from a bridge between Chinese companies and Western markets, as the countries strive to establish battery industries that determine the future shape of the automotive and clean energy sectors.

In addition, it received a further boost on Sunday after South Korea’s LG Chem and China’s Huayou Cobalt said they would build a lithium refinery and cathode materials plant in the country.

As the Kingdom is a free trade partner of the US, its raw materials are factored into the procurement targets required for electric vehicles sold in the US to benefit from subsidies of up to $7,500 under President Joe Biden’s Inflation Reduction Act (IRA).

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

Morocco, which also has strong trade relations with Europe, has 70% of the world’s phosphate reserves, a key ingredient in the cheaper, lower-end batteries whose global production China dominates.

Until now, Indonesia has been the main country rich in battery metal resources that has succeeded in attracting investment in processing, batteries and EV plants, but Morocco offers Chinese companies an advantageous route to the US and European markets.

Lahrs said that obtaining environmental permits in Europe would take “several years”, following appeals and legal proceedings. In Morocco, on the other hand, “we could start work as early as next month”, he added.

The plant, in which CNGR will invest jointly with Al Mada, will produce enough materials for 1 million electric vehicles a year. CNGR’s CEO added that there was significant potential for expansion beyond this figure.

On Sunday, King Mohammed VI has sent a congratulatory message to China’s President Xi Jinping, on the occasion of the Asian country’s national day.

In this message, the Sovereign expresses, on his behalf and on behalf of the Moroccan people, his warmest congratulations to President Xi, wishing the Chinese people further progress and prosperity.

“Our two nations will soon be celebrating the sixty-fifth anniversary of diplomatic relations between the Kingdom of Morocco and the People’s Republic of China. In this regard, I wish to praise the solid, strategic partnership between our countries,” the King further points out.

“I know both our nations are working untiringly to consolidate our ties in all sectors. I should like to take this opportunity to say how keen I am to continue working with Your Excellency, in the same spirit of friendship and mutual trust, to strengthen our special relationship and develop it as much as possible, thereby fulfilling our peoples’ aspirations,” the Sovereign continues.


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