Big investment to come in East Germany’s high-tech industry | Business | Economic and financial news from a German perspective | DW

From a window on the second floor of the town hall, Mayor Fred Mahro overlooks the green spaces of central Guben. The eastern German city, located about 100 kilometers southeast of Berlin and close to the border with Poland, does not often make the headlines.

But right now, says Mahro, Guben represents the growing ability of the eastern German state of Brandenburg to attract crucial domestic and foreign investment in forward-looking industries.

The German-Canadian company Rock Tech Lithium plans to build Europe’s first lithium converter in Guben, which would be a central element of the region’s electric mobility dynamics. If all goes according to plan, the company would produce 24,000 metric tons of lithium hydroxide per year – a crucial ingredient for batteries and enough to equip half a million electric vehicles with lithium-ion batteries.

Rock Tech Lithium has big plans for its construction site in Guben – construction work is expected to begin in the fall

Full orientation change

Like most parts of the former communist East Germany, Guben had to reinvent itself almost completely after German reunification in 1990. At that time, most of its former industries separated and the town’s population halved. The restructuring process never really stopped, and when German lawmakers decided in 2020 to completely phase out coal, the surface lignite mining area around Guben was again in shock.

“When the debate about a possible exit of our lignite coal in the region started here about five years ago, we met at the town hall and discussed what it would take to create alternative jobs,” said Fred Mahro told DW. “It was clear that we needed to attract new businesses and they would need suitable locations, so we wasted no time and got permission from the authorities to build new factories in our huge industrial park. “

Rock Tech Lithium is investing some 470 million euros (473 million dollars) in its future Guben site. She appreciated the fact that the groundwork was already prepared. The company had no doubts that it wanted a European site for its converter as the continent takes the lead in electromobility and aspires to become more self-sufficient in critical industries. This is especially true now that the European Union is set to ban the sale of combustion engine cars and vans from 2035. With these massive changes coming, the German-Canadian company can count on a growing demand for batteries for electric vehicles. in the years to come.

“We had searched all over Europe for a suitable production site, but in the end we prioritized Guben because our focus is not just on producing lithium hydroxide, but also on sustainability,” said to DW Rock Tech Lithium CEO Markus Brügmann. “Guben had already been developed as an industrial site and it has a rail connection on site which will allow us to avoid truck transport.”

Markus Brügmann, CEO of Rock Tech Lithium

Rock Tech Lithium CEO Markus Brügmann says choosing Guben was a strategic decision

The missing link in the value chain

The managing director added that a location in the eastern German state of Brandenburg had almost become a must, given the latest industrial activity in the region surrounding Berlin.

“Just look at what happened in Brandenburg in terms of the value of electric batteries and the supply chain. We are just closing a gap,” Brügmann explained. “You have everything here from electric car production to battery manufacturing, but you don’t have lithium hydroxide production yet, that’s where we come in. So strategically we’re in the right place. in Guben with potential customers all nearby.”

While negotiations on its investment in Guben are ongoing, Rock Tech Lithium does not want to disclose who its future customers might be. Suffice it to say that Brandenburg is also home to a Tesla Gigafactory and a large BASF factory where cathode active materials will be produced which are also needed for lithium-ion batteries.

Brügmann says that by 2030, around half of the materials that will be used by Rock Tech Lithium in Guben will come from recycled batteries.

“There is no doubt that the big shift to electromobility has helped recent investment activities in eastern Germany,” said Claus Doll, project manager at the Fraunhofer Institute for Energy Research. systems and innovation (Fraunhofer ISI). “If Germany had continued to push combustion engine technology, it would have been much harder for them to get a bigger slice of the pie, but now the traditional structures are being dismantled as new technologies that didn’t exist before are making inroads.”

Plan of the Intel construction site in Magdeburg

US chipmaker Intel plans to build several semiconductor factories in Magdeburg

Space is essential

What has played into the hands of the authorities in eastern Germany is that predominantly rural and less densely populated states like Brandenburg and Saxony-Anhalt offer better opportunities for investment in new locations than the traditional central industrial regions of western and southwestern Germany.

“A big advantage of eastern Germany is that there is no shortage of space for large projects – space that is so much harder to find in western Germany,” said Doll. “And there is a deep interest in new technologies and industry in general. The communities there also offer many incentives to attract companies and projects, which are quite often implemented more quickly in the East due to less bureaucracy and a more hands-on approach.”

The availability of ample space for new projects has indeed proven to be a big plus, whether for Tesla’s huge electric car factory in Grünheide, Brandenburg, or chipmaker Intel’s plan to build several semiconductor factories for €17 billion in Magdeburg, Saxony-Anhalt.

“Space may not be relevant for all projects, but it certainly is for large ones like Tesla and Intel investments where we’re talking at least 100 hectares each,” said Robert Hermann, co-CEO of Germany Trade & Invest. agency, okay. “And such large available areas are certainly easier to find in eastern Germany,” he told DW.

Investment locations in East Germany

R&D: Lots of catching up to do

Much of the overall investment in East Germany has gone into production and not so much into innovation or research and development (R&D) where better paying jobs can be found.

“Research and development mainly takes place in the traditional western centers of the German automotive industry,” said Claus Doll of Fraunhofer ISI. “But it is hoped that the new production sites in eastern Germany will gradually attract more research clusters. We need better storage technology for renewable energies, and a lot of research on this is already underway in eastern Germany.”

Germany Trade & Invest, which is responsible for marketing Germany as a business location and attracting business, agrees that a move towards more R&D in eastern Germany is already well underway.

“Great investment projects by people like CATL [China’s biggest producer of lithium-ion batteries] in Thuringia, Rock Tech Lithium in Brandenburg or Intel in Saxony-Anhalt, all located in eastern Germany, will undoubtedly help attract more R&D and innovation to the region,” said Robert Hermann of GTAI . “Tesla, for example, has already announced that part of its battery cell research will take place in Brandenburg and Berlin.”

Is the emerging energy dilemma a killjoy?

No matter which company sets up in eastern Germany, it will need a stable energy supply for its production.

“Renewables cover around 95% of East Germany’s electricity needs, and that’s crucial for many investors,” Hermann said. “It often influences their decision on where to put their money because they want to produce sustainably and signal that sustainability to their customers.”

Although much of East Germany’s electricity comes from renewable sources, it can sometimes be unreliable. Many industries need additional energy sources like oil or gas to run their facilities.

Russia’s war in Ukraine and subsequent Western sanctions changed everything, with supplies from Russia no longer guaranteed and German households and businesses bracing for an energy crisis during the winter months.

It is certainly a big headache for the mayor of Guben.

“Investors could be cold-eyed given the energy problems to come,” conceded Fred Mahro. “The question is when we can go almost completely gasless – that’s something I can’t imagine right now for many industries, including Guben’s.”

The general manager of Rock Tech Lithium is convinced that a solution can eventually be found. “We don’t see this as the end of any investment here,” stressed Markus Brügmann.

“There will hopefully be alternative natural gas from other sources; we also have a plan to use hydrogen which could eventually replace natural gas – but initially we will need natural gas, liquefied natural gas, and we are confident to secure the amount of LNG we will need from 2024 when production is expected to start.”

Edited by: Tim Rooks

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