Lithium bust spurs Ganfeng to delay project capex as losses hit
The Chinese company said it will strictly control spending on future projects.
US battery and miner recyclers have been rushing to close billions-dollar government loans before January, out of fear that the former president Donald Trump, if elected, would block funding necessary to boost American production of vital minerals for energy transition.
The falling prices of lithium, nickel, and other minerals this year, along with lower than expected EV sales have scared private financiers. This has put the conservative mining industry into an unusual position, where it needs Washington’s help to grow, and counter what is perceived by the West as China’s manipulation of the market.
Under the leadership of President Joe Biden’s Loan Programs Office, the US Department of Energy has granted nearly $25 billion to 21 companies. These include Li-Cycle and ioneer as well as Lithium Americas and Redwood Materials. They are planning to build plants that will recycle batteries and process lithium or other minerals to be used in electric vehicles. These conditional loans require final approval which can take time.
The US energy transition depends on the financing of mines. This includes solar companies such as South Korea’s Qcells and hydrogen firms Plug Power.
Before funds can be disbursed, the LPO office must review each loan and consult with other government agencies. This includes engineers, financial experts, and Energy Secretary Jennifer Granholm.
The US energy transition depends on the financing of mines
Mining companies, among others, are in a rush to close loans in light of Trump’s promise to “end electric vehicle mandate”, and the plans laid out in Project 2025 by former Trump Administration officials to shut down the LPO. Biden will leave office in just five months. According to interviews conducted with over two dozen industry executives and consultants, investors, analysts, and policymakers, some are likely to fail given the short deadline.
All sources agree that without these financial lifelines many critical domestic minerals projects may be halted in their planning stages. This could cause the Western EV Supply Chain to suffer as rivals with ties to Beijing increase market share by flooding the global markets cheap metals.
A company executive who had a loan before the LPO called Trump “a wildcard,” and the company wanted to finalize its loan before a new President took office in January. This executive was among five experts interviewed for this piece who declined to identify themselves so as to not offend Trump or Kamala Harris (his Democratic opponent in the November 5 election).
Trump has distanced himself from Project 2025 despite the fact that many of its energy-related sections were written by his former aides.
Three sources who were directly involved in the conversation said that LPO staff told applicants that they would not be able to finalize any outstanding loans until January due to the need to carefully scrutinize the creditworthiness of each project and other factors. The majority of loans will fall to the next President to deal with, according to these sources.
Both the Harris and Trump campaigns have not responded to our requests for comment.
The US Department of Energy (which controls the LPO) said that the loan program “provided a bankability bridge for American innovators and entrepreneurs for nearly 20 years.” It also emphasized “responsible management of taxpayer funds” as an important priority.
Energy Department spokesperson: “Federal program like ours continue to run despite administration changes.”
Harris, who broke the tie for the Inflation Reduction Act of 2022 with her vote, is expected continue many climate policies that Biden implemented, despite the fact that she has been accused by her aides of being strategically ambiguous in regards to energy proposals.
When Biden and Harris assumed office in January 2021, the LPO employed 90 people. Now it employs 400.
Trump only issued one LPO during his first term, lending to a Georgian nuclear project which had received loans previously under the then president Barack Obama. The LPO was largely ignored during Trump’s second term. However, his administration updated lending policies one month before leaving office in order to invite applications from critical minerals projects.
Sources say that a large part of the uncertainty surrounding a second Trump term is how he will implement the funding portion of the IRA. This IRA increased LPO funding, but Trump was against it. Trump could not close the LPO unilaterally as it’s funded by Congress, but he can slow down the loan underwriting to the point that many applicants will walk away.
Plug Power, which builds multiple US Hydrogen plants, has said that it works closely with the Energy Department in order to finalize its loan of $1.66 billion. Andy Marsh, Plug’s CEO said, “Given that (Department of Energy programs) have remained resilient through previous administrations, we remain confident in the future administrations continuing to support projects which have received conditional approval.”
LPO chief Jigar Shah said last year that the LPO, which provided Tesla with a $465-million loan to stave off bankruptcy in 2010, was meticulous in its review of loans under Biden. More than two thirds of applicants needed help to navigate through the complex credit approval process, which slows the timeline for loan approval.
Any delay in funding for US mine projects could jeopardize plans to supply cathode or battery facilities. Many of these are also eligible for LPO funding.
In Nevada, ioneer wants to close a $700-million LPO loan to fund its Rhyolite Ridge Lithium project. The estimated cost of the project is over $1 billion. General Motors’ Lithium Americas, backed by General Motors, has started work on the nearly $3 billion Thacker Pass Lithium project that Trump approved just five days before he left office. The company will receive a $2.26 Billion LPO Loan to fund the majority of the project. This loan is expected to be closed by December.
A spokesperson for Lithium Americas said, “We are pleased that the Trump and Biden Administrations have supported our project.” They both expressed how important Thacker Pass is to securing an adequate supply of vital minerals in the United States.
Ioneer, a company based in Australia, did not respond when contacted for comment.
Li-Cycle, a recycling startup, and Redwood also rush to close LPOs. Redwood had a conditional approval for a $2 Billion loan, which it was expecting to close last Year. However, the company has yet to receive funding.
Li-Cycle stated that it “continues to work closely with US Department of Energy in key technical, legal and financial workstreams” towards the development of definitive loan documentation.
Redwood and Qcells representatives did not respond when contacted for comments.
One executive who has a loan pending with the LPO believes that Trump is aware of the growing popularity of EVs, a stance echoed even by some Republicans.
Executives are anxious about whether Trump will see the benefit of using US Industrial Policy to support miners in a possible second term, or if he will lean more towards Project 2025’s goals.
Third executive who has a loan pending said that it wasn’t clear whether Trump’s comments on the topic were “rhetoric” or “actual policy.”
(Reporting and editing by Veronica Brown, Claudia Parsons and Veronica Brown; Additional reporting by Gram Slattery, Trevor Hunnicutt and Gram Slattery)
Comments