A Chinese company has ceased exporting a key piece of equipment used in processing lithium, marking a significant response to proposed export controls from Beijing amid escalating trade tensions. Jiangsu Jiuwu Hi-Tech (300631.SZ) informed customers last month that it would stop exporting filtration equipment known as a sorbent starting February 1.
Key Highlights:
Impact of Export Controls:
The halt in exports signals the implementation of potential restrictions announced by Beijing in January, which could require manufacturers to obtain government licenses for overseas sales of certain battery and lithium technologies, including sorbents.
Jiangsu’s decision reflects a shift in behavior even before the proposal becomes official, with other producers like Sunresin New Materials (300487.SZ) also negotiating with the government regarding the implications of these controls.
China’s Dominance in Lithium Production:
China is the largest producer of sorbents used to extract lithium from brines and other solutions. However, the exact market size remains unclear due to limited data from Beijing.
The ongoing trade tensions have prompted concerns within the industry, with some suggesting that the proposal has already created a “chilling effect” on exports to perceived unfriendly nations.
Government Engagement:
Officials from China’s Ministry of Commerce have been visiting companies to discuss the proposed export controls and have even warned against proceeding with significant export deals, such as a $1 billion negotiation currently in progress.
Potential Market Disruption:
The cessation of sorbent exports could impact Western oil producers looking to extract lithium, limiting their technological options. Companies like Exxon Mobil and Koch Industries have previously considered using Chinese processing equipment in their operations.
While some Western sorbent producers see an opportunity to capture market share, they face significant challenges due to the established dominance of Chinese competitors.
Building Alternative Supply Chains:
Industry leaders are emphasizing the need to innovate and develop independent technologies to reduce reliance on Chinese suppliers.
Brian Menell, CEO of TechMet, highlighted the urgency for Western companies to innovate in production and processing to compete effectively.
Increased Interest in Alternative Technologies:
Francis Wedin, chairman of Vulcan Energy Resources, noted a surge in inquiries from companies seeking to license their sorbent technology, indicating a growing interest in alternatives to Chinese products.