By Susan Zou
Founded in December 2001, GEM Co Ltd has become one of the
leading battery recyclers and battery materials producers in
China. The company contributes to 10% of recycling of
electronics wastes and 10% of discarded batteries in China, as
well as 5% of automobile recycling in the country.
The volume of cobalt it recycles has exceeded the primary
cobalt mining yield in China, and its volume of recycled nickel
is at a level equivalent to 8% of nickel from primary mining in
China. In addition, it supplies over 15% of global
nickel-cobalt-manganese (NCM) and nickel-cobalt-aluminium (NCA)
GEM, which stands for green eco manufacture, has also become
the business philosophy and entrepreneurial faith for Kaihua
Xu, the chairman of the company, he told Fastmarkets during an
interview with Metal Market Magazine.
Studying in Central South University, which is famous for
cultivating talents in metallurgy in China, Xu chose to
research recycling of tin from toothpaste tubes as his college
graduation project in 1985. "If I can extract tin from
toothpaste tube wastes and produce the recycled tin into
stannous sulfate, it will help to cut China’s
dependence on imported cargoes," Xu recalled.
At that time, China completely relied on imports of stannous
sulfate, a type of coloring pigment used in aluminium extrusion
manufacturing, he explained.
The project was successful and inspired Xu to pursue
recycling as his academic direction, while his interest in this
area was further strengthened following the successful
application of innovations in producing high-purity iron
powders from recycled steel scraps. "[In the early 1990s],
steel scrap only cost around 1,000 yuan ($152) per tonne, but
the high-purity iron powder could be sold around 7,000-8,000
yuan per tonne," Xu told Fastmarkets, adding that a few
companies realized the value of recycling and purchased this
innovation from him.
The second half of the 1990s saw China starting to rely
heavily on imported metallurgical raw materials after quite a
few ferrous and non-ferrous mines in the country had been
depleted. "Some of the Chinese cities with rich metallurgical
resources became depleted; for instance, Daye in Hubei
province, which was once the place of origin for the
country’s copper refining and manufacturing," Xu
He also noted that besides imports of overseas resources, a
few giant refineries in China started to secure raw materials
by acquiring or investing in mining projects outside China, but
not all of them were successful.
Xu asked himself at that time whether there was a third
path, and his answer was recycling. "We had a strong feeling in
mid-1990s that China’s own resources
can’t satisfy the country’s
manufacturing and economic development, [therefore,] we need to
build a path of recycling," he said.
From scholar to entrepreneur
To seek the recycling path in China, Xu went to Tokyo
University in 2001 as a visiting scholar in the Yamamoto
research lab, and the experience contributed to the change in
his career path. "The deepest impression I had was that
Japanese research institutes didn’t spend a lot of
time and energy in researching metallurgical refining, instead,
they focused on researching recycling, or in other words,
utilizing urban mining," Xu said.
In addition, many giant enterprises in Japan, such as DOWA,
were also dedicated to research and investment in recycling, he
added. "It shocked me when China was still relying on imports
of ores and concentrates, Japan had already developed its
recycled resources to replace primary feedstock," he said. "I
came to realize it should also be the way that China needs to
Meanwhile, Ryoichi Yamamoto, a scientist dedicated to
eco-innovation and Xu’s tutor in Tokyo University,
told Xu the green industry would be the largest industry among
all. "He said the limitation of earth was the limitation of
environment. No matter how many populations we have in the
future, we can survive; but if resources are depleted and the
pollution is beyond what the earth could bear, there is no
chance for human beings to survive," Xu recalled.
"On top of all, Yamamoto told me that scholars needed to
commercialize their innovations instead of just doing
researches at campus." This brought a few reflections to Xu and
pointed to a clear direction of what role he could play in the
path of recycling in China.
"As of 2000, I had studied recycling for 15 years, during
which I managed to make a few successful innovations, however,
I didn’t translate them into commercialized
products by myself," Xu said. "[But] under the pressure of
depletion and shortage of natural resources in China, we, as
scholars, indeed need to think how to improve the
sustainability of resources and environment in China."
By and by, Xu, together with two of his college friends,
decided to establish a company to roll out the philosophy of
green and eco, and they named this company as GEM. "It
represents a green aspiration," he said.
GEM is the first company in China to put forward the concept
of "resources are limited, recycling is unlimited," and started
to implement urban mining, he told Fastmarkets.
GEM was founded in Shenzhen, a vibrant hub of consumer
electronics in southern China. Xu said the reason they chose to
set up the company in that city was that it was a place where
entrepreneurs could establish their business with minimal
initial investments due to local government support, and what
they lacked at that time was money.
"The other driver for us to do green industry in Shenzhen
was that the European Union introduced the Restriction of
Hazardous Substances (RoHS) in electrical and electronic
equipment," Xu said. "That is also why the Shenzhen government
supported us in the eco-industry because the city was the
center for manufacturing consumer electronics."
After the RoHS Directive came into force in 2003, the EU
restricted the use of several hazardous substances in consumer
electronics, including lead, cadmium and mercury among others.
As a result, Xu and his business partners decided to research
and commercialize lead-free solder in consumer electronics.
However, the good luck had not accompanied them long before
the company was bogged down by the pressures of capital flows,
he told Fastmarkets. Even though the research team in GEM
quickly solved the technology bottleneck and obtained the
patent at an early stage for lead-free solder in the country,
and even got the first prize in awards for scientific and
technological advancement in Shenzhen, the company could barely
manage the operations.
"Commercializing this technology needed a lot of
investments. Besides, the business required a high occupation
of capital, but the payment period for electronics
manufacturers was quite long," Xu said.
What made matters worse was that the other two business
partners decided to quit and pursue their academic careers
instead. "I was really struggling and could barely afford the
water and electricity fees for the operations, and even
employees’ salary," he recalled.
Despite all those challenges, Xu did not give up. Instead,
he insisted on finding and developing a feasible recycling
model. "I had to stick to my initial aspiration. There needs to
be someone who practised those recycling innovations in
manufacturing in order to solve the bottleneck of resources and
the environment," Xu said. "We were seeking light in the
A turning point came after Xu changed the business direction
from lead-free solder manufacturing to battery recycling in
2003. "I had to solve two problems – first, to find a
business pattern that can generate cash; secondly, to find
venture capital to invest in the operations," he said.
GEM then started to recycle nickel and cobalt from battery
wastes, which did not cost a lot to purchase, and then produce
them into nickel and cobalt powder, which, however, had high
The new opportunity was coupled with a policy tailwind when
the Chinese government put forward the concept of the recycling
economy in 2004, which helped GEM to obtain financial support
from both government and venture capitalists. In that year, GEM
got its first venture capital of five million yuan, which
enable the company to set up a new recycling and manufacturing
plant in Hubei province, Xu recalled.
In 2009, China proposed the concept of low carbon emissions
for the first time, which in turn put GEM in the spotlight in
the capital market after it was listed in 2010. "Being listed
was a watershed for our business. After GEM was listed, the
company set up 16 recycling parks in China," he said. "Before
the company was listed, our sales revenue totaled 300 million
yuan, but in 2019 it grew to more than 14 billion yuan."
In the past ten years, GEM has set up a practical business
model and seamless supply chain, which enables the company to
stand up to fierce competition when an increasing number of
companies in China have been involved in the recycling
business, Xu noted.
"Recycling is a business that can be dated back in ancient
Chinese history. But why were there no notable recycling
enterprises in China? It was because we did not find a business
model that combines technology, management and profit-making,"
Technology innovations have been the focus for GEM since
recycling of electronics requires quite advanced technologies,
he noted, adding that the company has invested 2.5 billion yuan
in research and development in the past five years.
"To process scraps in an efficient and
environmental-friendly way, you need technologies to reduce the
harm to the surrounding environment to a minimal level. In
addition, you also need technologies to recycle the valuable
resources from scrap and produce them into value-added
products," he said. "For instance, when recycling battery
wastes, a critical problem is how to tackle performance repair
of nickel and cobalt, which requires rearrangement of electron
clouds in the atomic structure," he explained.
"Besides, we need to manage the recycling plants in a
scientific way by setting up recycling standards among others.
Otherwise, the recycling plants will just turn into scrap
On top of all that, GEM has managed to identify a business
and supply chain that is economically feasible and enables
profit-making, he added.
EV battery life value chain
The business and supply chain that GEM has established involves
the solutions for two problems – namely, allocations
of resources and energy conservation – which happen to
be the essence of carbon neutralization, a mission that is
prioritized and reiterated in China in recent years, according
The company has built up an enclosed supply chain –
including recycling nickel and cobalt resources from wasted
batteries and producing NCM and NCA battery materials
– a chain he described as the EV battery life value
chain. "GEM has been prioritizing feeding on recycled resources
instead of primary resources," he said. "Ahead of 2013, GEM
hadn’t used a single tonne of ores and
concentrates of nickel and cobalt."
"GEM is now one of the largest customers of Glencore for
cobalt hydroxide, and it is because we have grown our
processing capacities too quickly that our recycled resources
can’t satisfy the operations at current stage," he
In recent years, GEM has quickly ramped up its battery
materials operations amid a booming EV market. The company
produced 60,000 tonnes of NCM/NCA precursor materials in 2019,
though the output dropped to about 41,000 tonnes in 2020 due to
the Covid-19 pandemic, according to Xu, adding that it is
estimated the output will hit 100,000 tonnes in 2021.
He also told Fastmarkets that with the expansion of the
company’s capacity to process scrapped batteries,
the business is expected to cut its dependence on primary
resources considerably in the following ten years. "At the
current stage, the primary nickel and cobalt resources
purchased by GEM accounts for 60% of the company’s
total feedstock; but by 2025, the share of primary resources is
expected to drop to 40%; and by 2030, GEM can mostly be
independent of primary resources, realizing an enclosed supply
chain for nickel and cobalt," he said.
In addition, he pointed out that such EV battery life value
chain needs contributions from all participants on the supply
chain, including original equipment manufacturers (OEMs),
battery manufacturers and battery materials producers. "We are
working with global OEMs to recycle EVs. In the future, the EV
battery supply chain will become a closed cycle," he said.
China automobile manufacturer BAIC set up an EV battery
recycling plant with GEM in Huanghua, Hebei province, in 2018,
with the latter holding 15% shares, Xu noted.
Meanwhile, GEM is setting up a large-scale processing hub
for scrapped EVs and EV batteries in Wuxi, Jiangsu province,
aiming to build up recycling in the Yangtze River Delta, one of
the regions in China which has seen the quickest adoption of
EVs, he said, adding that the hub is expected to operate in
2022. The hub has annual capacity to recycle 100,000 units of
EVs and process 100,000 tonnes of EV batteries.
GEM has also started to implement such a recycling model in
Pohang, South Korea, and is also mulling implementing similarly
outside China, including Europe, which is aggressively pursuing
the electrification of transportation, Xu notes. "GEM aims to
recycle 30% of global EV batteries by 2030, contributing to
global carbon neutralization," he said.
Xu said that after meeting the targets he set for the
company by 2030, he would retire. "I would continue to do
innovation research on recycling since I have my own
national-level research and development center and
post-doctorate training platform to cultivate related talents,"
he said. "I am happy to return to research and contribute more
"Recycling is unlimited, innovation is also unlimited," he