Wellascent Electronic, a Chinese company manufacturing copper flat wire, decided to construct a production plant in Texas at the start of 2024. Their bold decision was based on a desire to avoid getting caught in the middle of the growing geopolitical risks between the U.S. and China. With the imposition of stiff tariffs on copper imports into the U.S., the company’s bet seems to be paying off as American-based buyers are making orders in order to avoid paying the tariff on imported flat wire and other semi-finished goods.
The company is slated to start getting products off the production line towards the end of this year and major clients, such as carmaker Stellantis, are lined up. Output is expected to hit 3,000 tons of flat wire two years from the commencement of production.
Wellascent intends to inject about $100 million into the factory within three years. This plant is a rare example of a Chinese firm that is set to thrive despite all the efforts that the administration in Washington has taken to counter the industrial dominance of China. This investment, in a way, shows that efforts to reshore manufacturing back on U.S. soil are working.
However, the views of policymakers are mixed on this issue of letting Chinese firms operate on U.S. soil. For example, many members of Congress want Ford to be disqualified from benefiting from tax credits while establishing a battery manufacturing facility. The reason for this stance is that Ford intends to use technology sourced from CATL, a Chinese company that is the largest global maker of batteries. Ford remains hopeful it will receive the tax credits.
Similarly, many manufacturers of solar products in the U.S. aren’t comfortable with allowing Chinese rivals to establish plants in the U.S. because they think these companies will have an unfair advantage due to benefiting from subsidy programs back in China as they source different inputs.
During the first term of President Trump, investments from China took a downward spiral and investment inflows from China into the U.S. have almost come to a halt. The hostility to Chinese investors is also reciprocated in China, and the Chinese government has actively discouraged its investment community from considering the U.S. as a viable investment destination.
This hostile environment makes the case of Wellascent all the more remarkable given that the company says it obtained approval from both American and Chinese authorities.
As Wellascent gears up to start producing its copper products, its owners can count their lucky stars for taking action when they did, and now the tariff situation is giving them the tailwinds they need to hit the ground running.
Entities in the copper extraction ecosystem like Aston Bay Holdings Ltd. (CVE: BAY) (OTCQB: ATBHF) can also be thankful that the U.S. tariffs exempted refined copper from the huge levies placed on copper imports.
NOTE TO INVESTORS: The latest news and updates relating to Aston Bay Holdings Ltd. (CVE: BAY) (OTCQB: ATBHF) are available in the company’s newsroom at https://ibn.fm/ATBHF
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