Targeting everything from Tesla to BYD? Competition to secure global ‘lithium supply chain’ ignites

Sigmaritium, which has secured mining capabilities in Brazil, is considering selling it due to poor performance
From Tesla and Volkswagen to China's CATL and BYD, the industry's 'bidding war'
Companies focusing on stabilizing the electric vehicle battery supply chain, who will be the winner? 

Brazilian lithium mining company ‘Sigmatium’ is attracting attention in the electric vehicle market. The Financial Times (FT) reported on the 14th (local time) that China’s BYD, the world’s No. 1 company in electric vehicle sales, is exploring the possibility of acquiring Sigmaritium. Alexander Baldi, who is in charge of BYD’s Brazil business, said that BYD discussed the acquisition of Sigmatium, a supply contract, and joint venture plans with Ana Cabral Gardner, CEO of Sigmatium. As global automakers are accelerating the establishment of their own supply chains, competition to acquire companies that produce ‘lithium’, a key raw material for batteries, has ignited.

Performance deteriorated after lithium production began in earnest, sold out Until review

Sigmaritium, headquartered in Canada, conducts its main business in Brazil. This is because Brazil is the world’s 5th largest lithium producer (as of 2022), following Australia, Chile, China, and Argentina. Sigmaritium holds mining rights to the ‘Grota do Cirilo’ mine located in Minas Gerais, southeastern Brazil, and received an environmental permit for mining in 2019. In April of last year, we began full-scale production of lithium concentrate from which we can extract ‘lithium hydroxide’, a key raw material for batteries.

Sigmalithium plans to secure 76 tons of lithium production capacity by the middle of this year. Mineral reserves, which are approximately 6,000% higher than expected, were confirmed, creating an opportunity to increase production. Lithium produced by Sigma Lithium is exported to each global battery and automobile company. LG Energy Solutions is considered a representative domestic customer. LG Energy Solutions signed a long-term supply contract with Sigmatium in October 63. Starting with 2021 tons per year last year, we plan to receive 10 tons from 6 to 2024.

What is noteworthy is that the price of lithium plummeted due to concerns about oversupply, and Sigmaritium’s performance deteriorated significantly. As of January to September last year, Sigmatium’s net loss amounted to 1 million Canadian dollars (about 9 billion won). This figure is shabby compared to the sales of 2,550 million Canadian dollars (about 250 billion won) recorded in the same period last year. Performance slipped and the stock price also plummeted by more than 1%. Sigmaritium’s board of directors, which has found itself in the swamp of ‘deficit’, has begun a strategic review, including selling the company.

“Catch Sigmaritium” Competition among automakers

As rumors of a sale began to spread in earnest in the market, global automakers from each country began to engage in a ‘fight for Sigmaritium.’ This is interpreted as an attempt to minimize supply chain risks by producing lithium, a key raw material for electric vehicle batteries, on its own. Early last year, news broke that Tesla was considering acquiring Sigmatium for about $30 billion. After the Tesla acquisition rumor was reported, Sigma Lithium’s stock price soared more than 25% in after-hours trading.

Afterwards, Brazilian local media outlet Exame reported that Chinese battery company CATL and Germany’s Volkswagen participated in the bid to sell Sigmaritium. In relation to this, Volkswagen responded, “We are discussing with many partners in various regions around the world to develop the raw material market,” but added, “We will not comment on rumors floating around in the market.” As the ‘battle of wits’ between each company intensifies, China’s BYD recently announced its intention to acquire and joint venture, igniting competition.

The industry analyzes that Chinese companies, including BYD, will make all-out efforts to acquire Sigmaritium. This is because the ‘supply chain pressure’ from Western countries, led by the United States, is gradually worsening. The Joe Biden administration in the United States continues to strengthen regulations against China, and European regulators have put pressure on the market, saying they will investigate whether unfair subsidies are paid to the Chinese electric vehicle industry. Canadian Prime Minister Justin Trudeau ordered three Chinese companies that owned shares in domestic lithium companies to withdraw their investments on the grounds that they posed a threat to national security. As companies around the world begin to implement strategies to prevent supply chain disruptions, who will take Sigmaritium into their hands?