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Tsvetana Paraskova

Tsvetana Paraskova

Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. 

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Critical Metals Race Accelerates Amid Boom In Lithium Supply

  •  China’s share of global lithium supply is expected to hit 32% in 2025, up from 24% in 2022.
  • The current lower lithium carbonate prices are incentivizing buyers in the United States, Europe, Japan, and South Korea to look to procure spot cargoes from China.
  • Both the United States and the EU seek to reduce their massive dependence on China for the supply of critical raw minerals and rare earth elements
Battery

Despite efforts from the United States and the EU to diversify their supply chains of critical minerals, China is expected to raise its share of the global supply of some of the metals key to accelerating the energy transition. 

China is a large supplier of lithium and cobalt, which are used in batteries and are critical for the rollout of renewable energy and electric vehicles. 

And China is set to boost its global market share of those minerals, analysts say.   

Lithium Output Boom

Bank UBS expects China to end up controlling nearly one-third of global lithium supply by 2025. Mines controlled by Beijing, not only in China but also in Africa, will see their total lithium output jump more than threefold in just three years—from 194,000 tons in 2022 to 705,000 tons by 2025, UBS said in a note last week, carried by Bloomberg.

This surge in supply would raise the Chinese share of global lithium supply to 32% in 2025, up from 24% in 2022, the bank said.  

China is also boosting the supply of lepidolite, the most abundant lithium-bearing mineral but a secondary source of this metal. The lepidolite rock hasn’t been seen as a cost-efficient supply of lithium because of its high energy and high emissions mining and poor quality. 

But lepidolite is expected to provide 280,000 tons of lithium for China in 2025, which would be 13% of global lithium supply, UBS says. Last year, Chinese lithium supply from lepidolite was 88,000 tons. Related: Oil Prices Crash Below $70 As Credit Suisse Shares Tumble

Last month, reports emerged that China had moved to supervise the extraction of lithium from lepidolite in the Jiangxi Province in eastern China, targeting unlicensed lithium extraction in Yichun, often dubbed the ‘Asian Lithium Capital’ because of its huge lithium reserves. 

Yet, the impact of the crackdown on illegal lithium mining could be short-lived due to a bearish outlook on near-term EV demand, price reporting agency Fastmarkets said. 

Lithium prices have recently dropped, but analysts see price increases in the medium and long term, as demand for lithium in the energy transition will only grow. 

The current lower lithium carbonate prices are incentivizing buyers in the United States, Europe, Japan, and South Korea to look to procure spot cargoes from China, Fastmarkets reported last week. 

“Every domestic lithium carbonate seller is trying to export their supply to the international market due to inventory accumulation and very weak demand,” a source at a Chinese lithium producer told Fastmarkets. 

China’s Cobalt Market Share To Rise To Half Of Global Supply 

A similar price slump in the cobalt market in recent months was the result of a surge in the supply of the mineral used in EV batteries. 

The cobalt markets are in a surplus due to a 23% jump in global mined cobalt supply and weak demand in the latter half of 2022, cobalt trading house Darton Commodities said earlier this month.  

Production growth in the Democratic Republic of Congo (DRC), the world’s top cobalt supplier, and in Indonesia, a relatively new entrant on the cobalt production market, drove the surge in cobalt supply last year, according to a Darton Commodities report cited by Bloomberg.  

Another report from Darton Commodities, quoted by the Financial Times, expects that China’s share is set to hit 50% of global cobalt output in the next two years. China’s CMOC Group is the second biggest producer of cobalt in the DRC, the country providing 75% of global supply currently. 

In cobalt refining, China’s grip on the market is even higher as it holds 77% of the global cobalt refining capacity, FT noted. 

U.S.-EU Cooperation On Critical Minerals 

As China is set to secure growing shares of key battery minerals, the U.S. and the EU look to diversify their supply chains and reduce dependence on China for the minerals critical for their net-zero goals. 

Just last week, U.S. President Joe Biden welcomed European Commission President Ursula von der Leyen at the White House to discuss a range of issues, including the supply of critical minerals. 

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The two sides “intend to immediately begin negotiations on a targeted critical minerals agreement,” President Biden and President von der Leyen said in a joint statement after their meeting on Friday.

“This kind of agreement would further our shared goals of boosting our mineral production and processing and expanding access to sources of critical minerals that are sustainable, trusted, and free of labor abuses,” they added.  

There have been recent EU-U.S. trade frictions over the subsidies in the U.S. Inflation Reduction Act, which Europe fears could prompt European clean energy manufacturing companies to relocate to America to benefit from the $370 billion in tax credits and loans earmarked for clean energy in the IRA.  

But both the United States and the EU seek to reduce their massive dependence on China for the supply of critical raw minerals and rare earth elements.  

“Cooperation is also necessary to reduce unwanted strategic dependencies in these supply chains, and to ensure that they are diversified and developed with trusted partners,” Biden and von der Leyen said in their statement.   

By Tsvetana Paraskova for Oilprice.com

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