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China’s lithium champion Ganfeng mints money but walks a fine line



Last month, Tesla founder Elon Musk complained that lithium refiners were “minting money” and making “software-like margins”.

Close to the heart of global lithium processing sits Ganfeng Lithium, a highly profitable Chinese group that is pivotal to western automakers’ dreams of going electric, but also vulnerable to state influence as Beijing tightens its control over strategic sectors.

With customers including Tesla, BMW and Volkswagen, Ganfeng’s every move faces mounting scrutiny. In recent weeks, the group has drawn headlines for an insider trading probe launched by Beijing’s top securities regulator, its near-$1bn acquisition of lithium mines in Argentina and a subsidiary’s participation in a joint venture to explore for lithium in Xinjiang, the western region where China has been accused of human rights abuses.

The raised attention underlines how the world’s second-largest lithium processor by production volume after Chilean rival SQM must keep Beijing on its side while establishing itself in regional electric vehicle supply chains in the west, analysts said.

“It’s a Chinese company undergoing a global expansion,” said Sam Jaffe, vice-president of battery storage solutions at E Source, a research group. “But I think the state does want to have influence over that company because they have become so important to the lithium-ion battery chain.”

Ganfeng declined to comment on the insider trading investigation and said it did not yet have specific exploration plans for Xinjiang.

Founded by Li Liangbin in Jiangxi province in 2000, the group has become one of the world’s most important companies for overcoming a bottleneck in the rollout of electric cars: turning raw materials into battery-grade lithium compounds.

In the first quarter of this year, Ganfeng’s operating profit jumped almost eightfold to Rmb4bn ($592mn) on revenues that more than tripled to Rmb5.4bn, resulting in margins of about 75 per cent. Lithium prices have rocketed, multiplying 13 times in two years to $67,050 per tonne of lithium carbonate in July, according to Benchmark Minerals Intelligence, a pricing agency.

Ganfeng’s roots are in chemical processing, but the group, which is dual-listed in Hong Kong and Shenzhen, says its focus is developing mining overseas in Argentina, Mexico, Australia and Mali for raw materials to refine into lithium hydroxide or lithium carbonate.

Its goal of geographical diversity comes amid rising geopolitical tensions, localisation of EV supply chains and development of domestic lithium processing by western nations, factors that could limit the feedstock available for Chinese refiners.

Ganfeng’s meteoric rise to a market capitalisation of $26bn marks a remarkable achievement for Li and business partner Wang Xiaoshen, who were raised in rural poverty. The pair owns just over a quarter of the group, according to stock exchange filings. Ganfeng declined to comment on its ownership structure.

Line chart of Rmb showing Ganfeng's shares rocket on soaring lithium prices

Alex Payette, chief executive of Cercius Group, a China risk consultancy, described Li as a “relatively low-profile businessman” who has kept Beijing leaders onside. That is despite the fact that “Li and his business undoubtedly benefited” from ties to some of President Xi Jinping’s political rivals.

“Given the strategic importance of lithium in China and the sheer size of Ganfeng Lithium’s market position, the [Chinese Communist] party would have a vested interest in maintaining the status quo with Li insofar as he does not step out of bounds,” Payette said.

Industry insiders praised the founders’ vision. Some call Li the “rain man” for his ability to read the market and make counterintuitive bets, including shipping brine — from which lithium can be extracted — from Chile to China to cut costs.

“Ganfeng foresaw the mineral shortage and started investing aggressively many years ago,” says Susan Zou, battery materials analyst at research company Rystad Energy.

Li Liangbin poses during the ceremony for Ganfeng’s Hong Kong listing in 2018
Li Liangbin, right, poses during the ceremony for Ganfeng’s Hong Kong listing in 2018 © Imagine China/Oriental Image/Reuters

When lithium prices slumped in 2019, the company kept investing, said John Kanellitsas, executive vice-chair of Lithium Americas, of which Ganfeng owns 20 per cent. “There was no wavering of their vision,” he said.

Despite the apparent neutrality and affability of the founders, Ganfeng faces the creeping influence of an increasingly authoritarian Beijing.

Joe Lowry, a former supplier to Ganfeng through US chemical group FMC and friend of Li and Wang, said: “Ganfeng keeping its independence might be an issue. It depends on how the Chinese government views its battery and electric vehicles ambitions.”

Analysts said there is a growing risk that Beijing asks Ganfeng to prioritise Chinese EV makers if the lithium shortage deepens in coming years. Some even suggested a large state-owned mining group such as Zijin Mining could be directed to take over Ganfeng.

But executives at Ganfeng’s business partners argued it might thrive even if Beijing tightened the screw. “For Ganfeng, limiting the flow of material out of China would create an opportunity as they are developing chemical processing globally, where the Chinese government doesn’t have jurisdiction,” said one.

The Chinese government’s main gripe with the lithium sector has been the risk the price rise dents the market for electric cars, said Daisy Jennings-Gray, an analyst at Benchmark Minerals Intelligence.

Ganfeng said resource shortages and price spikes were mostly caused by the “mismatch between supply and demand” and that the best solution was “accelerating exploration and development of upstream resources”.

However, the west’s increasingly hawkish view of China has already caused complications for the company. Vancouver-based Lithium Americas is considering spinning off a Nevada project as an independent company, potentially ridding it of Chinese ownership and easing its access to US government support. Mexico, where Ganfeng is developing a project, has moved to nationalise lithium assets.

Such pressures are set to intensify. The climate change bill passed by the US Congress last week could target Chinese groups by requiring a threshold of raw materials in batteries to be extracted, processed or recycled in the US or by a free trade agreement partner.

Lowry said Ganfeng would find it increasingly difficult to navigate between increasing hostility towards Chinese companies in the west and meeting demands from Beijing.

“Ganfeng is going to be treading a fine line,” he said.

Additional reporting by Maiqi Ding in Beijing

Video: Cars, companies, countries: the race to go electric

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Sister Patricia Daly, 66, Dies; Took On Corporate Giants on Social Justice



For years, Sister Pat and other environmentalists had urged ExxonMobil to take significant steps to reduce greenhouse-gas emissions from its operations and products. In 2007, she proposed a resolution that called on that energy giant to set a firm date to report on its progress.

“We’re the most profitable company in the history of the planet,” she told Rex Tillerson, then the company’s chief executive (and later secretary of state in the Trump administration), at the company’s annual meeting, “but what will be our long-term health when we are really faced with the regulatory and other challenges around global warming?”

She added: “We are now, this company and every single one of us, challenged by one of the most profound moral concerns. And we have the wherewithal to respond to that.”

The proposal won 31 percent of the ballots, or about 1.4 billion shares, the largest tally for an ExxonMobil climate-change resolution. If not an outright victory, it was a page in a decades-long narrative that led ExxonMobil to put a climate scientist on its board in 2017. Three executives who recognized the urgency to address climate change joined the company’s board in 2021, nominated by a tiny activist hedge fund, Engine No. 1.

“The arc of her work led us to those victories by working from the inside and the outside,” John Passacantando, the founder of Ozone Action, an anti-global warming group, and a former executive director of Greenpeace, said in a phone interview.

In 1999, Vanity Fair named her to its Hall of Fame, applauding her as one who “translates belief into commitment and never backs down from a fight.”

Mary Beth Gallagher, who replaced Sister Pat as executive director of the Tri-State Coalition in 2017, said Sister Pat had not become frustrated when her resolutions were routinely voted down.

“She lived in hope,” Ms. Gallagher said. “We never talked about winning or losing. It was about raising consciousness and educating. If we’re not asking these questions, who will?”

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Families can make a tax-free rollover from 529 plans to Roth individual retirement accounts starting in 2024



Maskot | Maskot | Getty Images

Americans who save for college in 529 plans will soon have a way to rescue unused funds while keeping their tax benefits intact.

A $1.7 trillion government funding package has a provision that lets savers roll money from 529 plans to Roth individual retirement accounts free of income tax or tax penalties.

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The House passed the measure Friday and the Senate did so Thursday. The bill heads to President Biden, who’s expected to sign it into law.

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The rollover measure — which takes effect in 2024 — has some limitations. Among the largest: There’s a $35,000 lifetime cap on transfers.

“It’s a good provision for people who have [529 accounts] and the money hasn’t been used,” said Ed Slott, a certified public accountant and IRA expert based in Rockville Centre, New York.

That might happen if a beneficiary — such as a child or grandchild — doesn’t attend a college, university, vocational or private K-12 school, or other qualifying institution, for example. Or, a student may receive scholarships that mean some 529 funds are left over.

Millions of 529 accounts hold billions in savings

There were nearly 15 million 529 accounts at the end of last year, holding a total $480 billion, according to the Investment Company Institute. That’s an average of about $30,600 per account.

529 plans carry tax advantages for college savers. Namely, investment earnings on account contributions grow tax-free and aren’t taxable if used for qualifying education expenses like tuition, fees, books, and room and board.

Retirement plan changes in the omnibus spending bill

However, that investment growth is generally subject to income tax and a 10% tax penalty if used for an ineligible expense.

This is where rollovers to a Roth IRA can benefit savers with stranded 529 money. A transfer would skirt income tax and penalties; investments would keep growing tax-free in a Roth account, and future retirement withdrawals would also be tax-free.  

Some think it’s a handout for the rich

However, some critics think the rollover policy largely amounts to a tax handout to wealthier families.

“You’re giving savings incentives to those who can save and leaving behind those who cannot save,” said Steve Rosenthal, a senior fellow at the Urban-Brookings Tax Policy Center.

A 2012 analysis conducted by the Government Accountability Office found the typical American with a 529 account had “much more wealth” than someone without: $413,500 in total wealth for the median person, about 25 times the amount of a non-accountholder.

You’re giving savings incentives to those who can save and leaving behind those who cannot save.

Steve Rosenthal

senior fellow at the Urban-Brookings Tax Policy Center

Further, the typical owner had a roughly $142,000 annual income versus $45,000 for other families, the GAO report said. Almost half, 47%, had incomes over $150,000.

The new 529-to-Roth IRA transfer provision doesn’t carry income limits.

Limitations on 529-to-IRA transfers

While the new tax break primarily benefits wealthier families, there are “pretty significant” limitations on the rollovers that reduce the financial benefit, Jeffrey Levine, a certified financial planner and certified public accountant based in St. Louis, said in a tweet.

The restrictions include:

  • A $35,000 lifetime cap on transfers.
  • Rollovers are subject to the annual Roth IRA contribution limit. (The limit is $6,500 in 2023.)
  • The rollover can only be made to the beneficiary’s Roth IRA — not that of the account owner. (In other words, a 529 owned by a parent with the child as beneficiary would need to be rolled into the child’s IRA, not the parent’s.)
  • The 529 account must have been open for at least 15 years. (It seems changing account beneficiaries may restart that 15-year clock, Levine said.)
  • Accountholders can’t roll over contributions, or earnings on those contributions, made in the last five years.

In a summary document, the Senate Finance Committee said current 529 tax rules have “led to hesitating, delaying, or declining to fund 529s to levels needed to pay for the rising costs of education.”

“Families who sacrifice and save in 529 accounts should not be punished with tax and penalty years later if the beneficiary has found an alternative way to pay for their education,” it said.

Are 529 plans already flexible enough?

Some education savings experts think 529 accounts have adequate flexibility so as not to deter families from using them.

For example, owners with leftover account funds can change beneficiaries to another qualifying family member — thereby helping avoid a tax penalty for non-qualified withdrawals. Aside from a kid or grandkid, that family member might be you; a spouse; a son, daughter, brother, sister, father or mother-in-law; sibling or step-sibling; first cousin or their spouse; a niece, nephew or their spouse; or aunt and uncle, among others.

Owners can also keep funds in an account for a beneficiary’s graduate schooling or the education of a future grandchild, according to Funds can also be used to make up to $10,000 of student loan payments.

The tax penalty may also not be quite as bad as some think, according to education expert Mark Kantrowitz. For example, taxes are assessed at the beneficiary’s income-tax rate, which is generally lower than the parent’s tax rate by at least 10 percentage points.

In that case, the parent “is no worse off than they would have been had they saved in a taxable account,” depending on their tax rates on long-term capital gains, he said.

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Goldman grumbling grows for banking giant to sack CEO David Solomon



The knives are out for Goldman Sachs CEO David Solomon, and this time the people brandishing them aren’t the usual suspects — his junior staffers annoyed that they have to work late or come into the office several times a week.

Solomon’s problems are more serious and existential, I am told, and how he handles what can best be described as a revolt in some quarters of Goldman’s middle and upper management ranks could determine how much longer he stays in his job.

Solomon, 60, took the job in 2018 and was always somewhat of an odd choice to run the white-shoe investment bank that usually cultivated its leaders from within. He cut his teeth at a decidedly un-Goldman-like venue: the scrappy investment bank Bear Stearns (ultimately one of the causalities of the 2008 financial crisis).

He joined Goldman in 1999, as a partner, no less, because his deal-making chops allowed him to skip layers of management.

In other words, Solomon is an outsider at a firm with a wickedly insular culture. He has a quirky side gig as a DJ in the summer Hamptons party circuit. He’s also not one for small talk, and doesn’t consult with a lot of people before handing down his edicts. 

“He doesn’t breed a lot of love,” said one former Goldman executive who knows Solomon well.

Lots of people at Goldman don’t like him, and they’re letting their views be heard both internally and with pals at rival firms.

Solomon as a DJ
Solomon is an outsider at a firm with a wickedly insular culture.
David Solomon/Instagram

For the record: I’ve met Solomon and like him for his no-BS style. And until pretty recently, the numbers show him doing a great job. Goldman was running on all cylinders in deals and trading. Even as the market corrects, shares are up about 60% since Solomon took over as CEO in 2018 compared to around a 44% rise in the S&P during that time.

Goldman is still the top M&A shop, even widening its market share over rivals in that important business line. Solomon was the first among his fellow CEOs to see the downturn and enact significant layoffs to cut costs.

Still, the grumbling about Solomon is spreading to the managing director and partner class. High-priced Wall Street talent don’t call all the shots at any firm, of course. But Goldman’s MDs and partners have historically been a powerful force when the board decides the fate of current management, which makes Solomon’s hold on his job increasingly precarious as more and more of them defect from his camp.

David Solomon as a DJ
Solomon was the first among his fellow CEOs to see the downturn and enact significant layoffs to cut costs.
David Solomon/Instagram

Here’s how they’re building a case against him: Goldman’s longtime archrival investment bank Morgan Stanley now easily dwarfs Goldman in market value, $144 billion to $116 billion, continuing a trend that predates Solomon. That comes amid a slowdown in banking deals, Goldman’s bread-and-butter business, and Solomon’s home turf.

Morgan’s CEO James Gorman deftly expanded the firm’s wealth management operations, which provide steady revenues. Solomon’s effort to diversify was an overindulgence in something called Marcus, a digital retail bank launched by his predecessor Lloyd Bankfein that Solomon made his baby. So far, it’s been a disaster, so much so that Solomon has been forced to scale back, possibly on the way to winding it down.

Goldman, meanwhile, has missed targets in its recent earnings announcements, and more downward surprises could be in store as markets continue to wobble. Bonuses are down, in some places cut in half, albeit from the nosebleed levels of 2021.

Goldman Sachs headquarters
The grumbling about Solomon is spreading to the managing director and partner class.
AFP via Getty Images

Traders did well in 2022 because Goldman’s are particularly adept in profiting off turbulence, but part of their pool is being diverted to bankers to keep them in-house until the deal slowdown ends.

Since Solomon is a banker, he’s also being accused of favoritism, which in truth is a pretty lame charge, since bankers often subsidize trader bonuses when the markets aren’t profitable. Still, the Goldman trading department is powerful and can spark management change, as it has done in the past.

There’s also a question about Solomon’s allegiance to Goldman’s stand-alone culture. In its 153-year existence, Goldman has operated on the assumption that it would be the acquirer in any major strategic acquisition. Solomon’s experience at Bear, then one of the most transactional places on Wall Street, means he could be looking for a deal and not one that keeps Goldman in charge.

Morgan Stanley CEO James Gorman deftly expanded the firm’s wealth management operations, which provide steady revenues.
Morgan Stanley’s James Gorman deftly expanded the firm’s wealth management operations, which provide steady revenues.
AFP via Getty Images

At a time when most Goldman insiders believe he needs to do a “transformational deal,” i.e., something big that allows it to better compete against Morgan Stanley and super banks like JP Morgan, there is speculation that Solomon might allow Goldman to be swallowed whole by, say, a big asset manager or bank if the price was right.

As best I can tell, this grumbling, though real, doesn’t immediately threaten Solomon’s job. Then again, there is something to be said for keeping your producers happy.

Jack Welch, the legendary CEO of General Electric, was a notorious screamer and demanding beyond belief. Yet Welch knew how to nurture his people.

Former General Electric CEO Jack Welch
Jack Welch was a notorious screamer and demanding beyond belief. Yet Welch knew how to nurture his people.
Getty Images

“Jack could chew your ass, then put his arm around you and make you feel great,” one of his longtime executives, Bob Nardelli, once told me.

It’s why so many other talented execs chose to stay around under Welch, abuse and all, and left when his successor took over, watching GE implode from the outside.

Maybe it’s a good time for Solomon to take a page from Welch and start hugging it out.

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