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U.S. and Europe Race to Reduce Dependence on China for Lithium Supplies

  • China dominates the global lithium supply chain, accounting for 70% of production and refining.
  • Several countries, including the U.S. and India, are seeking to reduce their dependence on China for lithium supplies.
  • The world's shift towards sustainable energy and electric vehicles is increasing the demand for lithium.
Mining

Via Metal Miner

 

Dubbed “white gold,” lithium is immense valuable in the modern world. Though lithium prices dropped dramatically from the highs achieved in late 2022, China still dominates the lithium supply chain. This continues to spur on multiple countries looking to lay their hands on this valuable metal.

Lithium is a critical component in rechargeable batteries for electric vehicles and solar/wind power sources. Meanwhile, the high energy density and long lifespan of lithium-ion batteries, also make them a common component in consumer electronics like smartphones and laptops.

China not only dominates the global lithium refining industry but also controls much of the lithium supply chain. Ironically, China itself possesses less than 7% of the world’s lithium reserves. It is also the largest importer and refiner of the metal, gobbling up 70% of total lithium compounds. Meanwhile, the country accounts for 70% of global lithium production, mainly for its domestic lithium battery manufacturers.

Lithium Prices Fell in 2023, But Sourcing Remains Contentious

While the U.S. and some European nations want to wean themselves away from this Chinese dominance, China itself continues to scour the world for lithium sources. In fact, several days ago, Bloomberg reported that well-known Chinese battery component maker CNGR was exploring options to buy a stake in Argentina brine deposits in an effort to build yet another link in its supply chain. 

As per the report, CNGR executives personally looked at three deposits in Argentina last week, including the Jama project in Jujuy province and the Rincon project in Salta province. It also stated that CNGR aims to develop a lithium supply chain upstream for customers in Western nations.

Recently, the firm established a 90% stake in Lithium Energy Ltd.’s Solaroz Lithium brine project in Argentina. Meanwhile, the company and African private investment fund Al Mada signed a deal for an industrial center in Morocco last September. Just a few weeks ago, POSCO Holdings and China’s CNGR announced the establishment of nickel and precursor production facilities in Pohang, South Korea, marking a significant advancement in the global battery materials supply chain.

India Also Making Moves to Secure Lithium Supply

Meanwhile, China’s neighbor India has been working to secure its own supply of lithium. According to a media reports, battery materials producer Altmin is currently in discussions with the Australian government to gain access to that country’s lithium supplies. As India’s sole cathode active materials producer, Altmin gets its lithium carbonate from Brazil and Bolivia. Due to the absence of lithium processing facilities in India, the government continues to offer incentives to encourage private companies to establish these facilities locally.

About a year ago, Altmin teamed up with Bolivia’s state-owned Yacimientos de Litio Bolivianos to set up a plant in Bolivia for producing lithium iron phosphate materials. Altmin ultimately plans to source lithium carbonate from YLB’s Bolivia plant for India operations. Additionally, the company is reportedly contemplating putting up lithium refineries in Brazil and Australia.

The Lithium Market Hinges on China and Africa 

As the world shifts toward sustainable energy, the availability of lithium will likely play a crucial role in the success and efficiency of future renewable energy projects. China has the largest number of EVs in the world and is also the leading lithium refiner. Over the years, China has established a monopoly over the supply chains of several minerals, including cobalt, lithium and many rare earth metals.

Lithium-rich countries in Africa have long piqued China’s interest. Just about 5% of global natural lithium ore reserves are in Africa, and a ginger group of nations like the Democratic Republic of the Congo, Ethiopia, Ghana and Mali, to name a few, sit on rather large lithium deposits. Amid a global demand for battery components, this is an ideal opportunity to generate significant revenue.

The Path to Africa’s Lithium Industry Boom

That said, setting up a full-fledged lithium processing plant in any African country would require a consistent supply of electricity and raw lithium. Other major challenges include the lack of transportation infrastructure and the erratic politics common to the area. Nonetheless, this analytical report indicates that the Chinese continue to acquire African mines for rare earths and other such minerals, sending the raw materials back to China for refining. Meanwhile, Africa requires this Chinese boost in order to progress its own lithium industry, at least for the short term.  

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This situation presents a paradox. For Africa to fully benefit from its lithium supply, it must enhance its capabilities and effectively manage its relationship with China. To that point, an ongoing dispute in Namibia could set a precedent for other lithium-producing African countries to secure better terms with China. Ultimately, the success of the global energy transition may depend on how effectively Africa negotiates its lithium exploration with China and other developed nations. 

By Sohrab Darabshaw

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  • George Doolittle on June 10 2024 said:
    Really what kind of race? A wheelbarrow race?

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