- China says Canada breaks commerce and market rules
- Chinese companies’ shares plunge
- Companies say do not expect huge impact on performance
Canada ordered three Chinese firms on Wednesday to divest their stakes in Canadian critical minerals, citing national security. China in retaliation accused Ottawa of using national security as an excuse and said the divestment order broke international trade and market rules.
As countries compete to build up reserves of materials required for a shift to a greener economy, the news knocked down the Chinese companies’ shares on Thursday, although they said in stock exchange filings they did not anticipate a great impact on their performance.
The three ordered to divest their stakes are Sinomine (Hong Kong) Rare Metals Resources Co Ltd, Zangge Mining Investment (Chengdu) Co Ltd, and Chengze Lithium International Ltd, also based in Hong Kong.
The Canadian government ordered the divestiture following “rigorous scrutiny” of foreign companies by Canada’s national security and intelligence community, Industry Minister Francois-Philippe Champagne said in a statement.
“While Canada continues to welcome foreign direct investment, we will act decisively when investments threaten our national security and our critical minerals supply chains, both at home and abroad.”
Sinomine was asked to sell its stake in Power Metals Corp (PWM.V), Zangge Mining was ordered to exit Ultra Lithium Inc (ULT.V), and Chengze Lithium was asked to sell its investment in Lithium Chile Inc (LITH.V).
Chinese foreign ministry spokesperson Zhao Lijian said the Canadian government was using national security as an excuse to hinder normal cooperation between Canadian and Chinese companies and was disrupting global supply chains.
“China urges Canada to stop the unreasonably targeting Chinese companies (in Canada) and provide (them) with a fair, impartial and non-discriminatory business environment,” Zhao told a regular news briefing, adding that Beijing would diligently defend the legitimate rights and interests of Chinese firms.
Spot lithium prices have surged by more than 200% in the last year, caused by supply constraints that are expected to persist. Rystad Energy predicted primary lithium minerals supply to be 8.5% short of the total lithium demand in 2025, in comparison to about 10% short of demand in 2022.
Susan Zou, a senior analyst at Rystad Energy, commented on Canada’s decision:
“The latest attitude from Ottawa underscores the global competition of critical battery minerals in light of projected EV battery demand boom.”
The share price of Sinomine Resources plunged 7.8% to 86.74 yuan ($11.86) on Thursday, while Chengxin’s share price slumped by as much as 4% but ended at 0.7% higher at 45.65 yuan. Zangge Mining’s share price dropped by 3.7% during the day before climbing 1.1% up to close at 28.96 yuan.
In the past week, Ottawa said it must beef up a strong critical minerals supply chain with like-minded partners, as it drafted rules aimed at securing the country’s critical minerals sectors from foreign state-owned firms.
“The federal government is determined to work with Canadian businesses to attract foreign direct investments from partners that share our interests and values.”
Canada has substantial deposits of critical minerals such as cobalt and nickel required for cleaner energy and other technologies. Demand for the minerals is expected to scale up in the coming decades.
Earlier in 2022, countries including the United States, Britain, and Canada formed a partnership aimed at protecting the supply of critical minerals as global demand for them increases.
($1 = 7.3163 Chinese yuan renminbi)