Courtesy of The Financial Times, a report on China’s investment in Morocco, which possesses 70% of the world’s reserves of phosphate, an ingredient in the cheaper, lower-range batteries in which China dominates global production:

Chinese companies are avoiding or delaying direct investments in the US and Europe because of geopolitics and lengthy waits for permits, one of the world’s largest battery material producers has warned after announcing a $2bn investment in Morocco.

China’s CNGR Advanced Material said last week that it would build a cathode materials plant in Morocco to supply the US and European battery markets, as the north African country emerged as an unlikely winner from US-China tensions.

Thorsten Lahrs, chief executive of CNGR Europe, told the Financial Times that Morocco hit a “sweet spot” for Chinese producers wanting to serve the US and Europe.

He said plants could be built quicker in the north African country than in the target markets, which had lengthy permitting processes, and that they were a less risky investment prospect because they could switch to exporting elsewhere should the US or Europe introduce new protectionist policies.

“Being Chinese means being flexible,” he told 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.”

Morocco is starting to benefit as a bridge between Chinese companies and western markets as countries race to build battery industries that will determine the future shape of the automotive and clean energy sectors.

Morocco gained 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.

Because Morocco is a free trade partner of the US, its raw materials count towards sourcing targets required for electric vehicles sold in America to receive subsidies of up to $7,500 under 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,” said Kevin Shang, senior battery analyst at consultancy Wood Mackenzie.

Morocco, which also has robust trade relations with Europe, possesses 70 per cent of the world’s reserves of phosphate, a key ingredient in the cheaper, lower-range batteries in which China dominates global production.

Until now Indonesia has been the main country rich in battery metal resources that has managed to attract processing, battery and EV factory investments but Morocco offers an advantageous route for Chinese companies to access both the US and European markets.

Chinese companies face the risk of being blocked out of the US and EU markets. Lawmakers in the US are scrutinising Ford’s proposal to license technology from the world’s largest battery producer CATL for a plant in Michigan. Meanwhile, the EU this month launched an anti-subsidy probe into Chinese EVs.

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 23 per cent global market share. Its customers include Tesla, CATL and LG Chem.

Lahrs said securing environmental permits in Europe would take “several years” after going through appeals and court processes. By contrast, in Morocco “we may have ground breaking already next month”, he said.

The plant, in which CNGR will jointly invest with Al Mada, a conglomerate owned by the Moroccan royal family, will generate enough material for 1mn EVs a year. Lahrs added that there was significant potential to expand beyond that.