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Shares in European battery materials specialist Umicore rose 14 per cent on Tuesday after Canada granted huge subsidies for its planned plant in Ontario.
The stock price rise for the Belgian group, which added almost €1bn to its market capitalisation, highlights how a subsidy race triggered by the US Inflation Reduction Act is benefiting certain parts of the battery supply chain.
The Canadian and Ontario governments pledged late on Monday to provide up to C$975mn ($715mn) of support for a cathode materials factory that will cost up to C$2.7bn and will eventually supply enough material for 800,000 electric vehicles produced by manufacturers including BMW.
As a result of what Umicore called “higher than expected” subsidies, the company cut its forecast for capital expenditure between 2022 and 2026 to €3.8bn from more than €5bn previously.
After the news on Tuesday, Umicore shares staged their second-biggest one-day rally for three decades.
The business, which has historically made the bulk of its revenues from making catalytic converters for combustion engines, is one of a handful of western suppliers that produces the highly specialised materials used in the most expensive part of an EV battery, the cathode.
Chief executive Mathias Miedreich said in a statement that the “investment in Canada represents the final step in creating a truly global production presence”.
Umicore has a joint venture with Volkswagen that has also contributed to lowering its capital spending forecasts. The unit, called Ionway, announced last week that its first plant for cathode material production in Europe would be set up in Nysa, Poland.
Umicore also announced a new target for a 25 per cent margin for its earnings before interest, taxes, depreciation and amortisation from 2026, up from above 20 per cent to 2030.
On Monday, it signed an agreement to supply the US battery plants of Chinese-owned battery group AESC with material produced from its Ontario plant.
Meanwhile, Ford has paused construction on a $3.5bn electric vehicle battery plant in Michigan using technology from another Chinese company CATL, amid Republican criticism and an autoworkers’ strike
Canada has been a big beneficiary of US president Joe Biden’s $369bn Inflation Reduction Act because raw materials sourced from Canada count towards tax credits, while its clean power is a draw for materials production, which is energy intensive.
But the US has also offered subsidies for the battery supply chain, including $2.8bn from the Department of Energy, pushing Canada to respond.
Canada’s mining minister Jonathan Wilkinson told the Financial Times last month that the government had increased subsidies to persuade companies from moving investments to the US and that the IRA “at times went beyond from a financial perspective where it needed to”.
