The Shenzhen-based firm aims to collect and process 30 per cent of China’s discarded electric vehicle batteries

The former university professor leading one of the companies most crucial to the future of transport has a warning for anyone eyeing his patch.

“I want to tell everyone who wants to enter this market: don’t do it, you are wasting your money,” said Xu Kaihua, chairman of Chinese battery metals maker GEM Co. “Only the top five will survive.”

The firm Xu founded in Shenzhen in 2001 has adopted an expansive business model that has made it central to supply chains stretching from the cobalt and nickel mines of Africa and Southeast Asia to the motors of Volkswagen and BMW cars. GEM’s diverse footprint includes a plant in Indonesia that will allow it to avoid that nation’s export ban on nickel, a key raw material. The company is already the world’s biggest recycler of metals from used batteries.

The strategy has established GEM in a small band of Chinese firms, including Zhejiang Huayou Cobalt Co and Jinchuan Group Co, whose relatively low profile belies their collective significance to the future of energy use. GEM makes the kind of high-purity chemicals derived from nickel, cobalt and lithium that will be required in massive quantities over the next decade as the world’s carmakers electrify their fleets.

GEM has “a unique position” in the battery supply chain, said Hans Eric Melin, founder of London-based consultancy Circular Energy Storage, who has visited the company’s facilities. “They have managed to leverage their historical role as recyclers to become one of the leading battery material companies.” The company is also heavily favoured by analysts, with 11 of 12 surveyed by Bloomberg holding buy ratings on its Shenzhen-listed stock.

In an interview earlier this month in Yichang, Hubei province, where the company operates one of 15 plants across China, Xu talked about a “green dream” that prompted his switch from academia to commerce. “When you start a company, you need to have a vision. I understood we would eventually need to use recycling to solve the problem of limited resources,” he said.

Xu, now 53, specialised in metals recycling at Central South University in neighbouring Hunan province. His goal is for GEM to collect and process 30 per cent of China’s discarded electric vehicle (EV) batteries, as more and more units flow back into the supply chain over the coming decade.

Some 39,000 tonnes of cobalt and 125,000 tonnes of nickel could come from spent batteries by 2030, helping to offset any shortfall in mined supply, according to BloombergNEF. For cobalt, that would meet more than 10 per cent of projected demand. By 2025, GEM wants to get 8,500 tonnes of cobalt and 19,000 tonnes of nickel from recycling.

While China’s slump in EV sales after it cut subsidies this year would seem to be a headwind for GEM, for Xu it means that new competitors will struggle to find a foothold. The company said it makes about a fifth of the world’s precursor material – a chemical mix that is used in the cathodes that store and release electricity in rechargeable batteries.

“For battery metals, there’s a lot of new capacity from newcomers,” he said. “But we have great cooperation with our customers. For new capacity, it’s going to be difficult for them to break in.”

GEM struck a five-year deal in October to take a big chunk of the top cobalt miner’s output from the Democratic Republic of Congo (DRC), but its investment strategy has been focused on securing enough nickel.