Lithium, a soft, silvery metal, is a component in the lithium-ion batteries that power electric vehicles and smartphones. By the end of the decade, demand could outstrip supply by some 300,000 tons, reports The Wall Street Journal (May 25, 2023).
Chinese companies have long dominated lithium refining, but their hunt to secure a greater share of the world’s supplies of the metal is leading them to buy up stakes in mines throughout the developing world as they face increasing resistance in Western countries. It is a risky strategy. China is spending billions on stakes in nations that have histories of political instability, local resistance and resource nationalism. Projects often face protests, regulatory delays and even cancellations.
If China succeeds, however, it could secure access to 1/3 of the world’s lithium-mine production capacity needed by 2025. (It currently holds only 8% of the world’s reserves). China’s drive to secure a greater hold on the world’s lithium is fueled by concerns that its booming electric-vehicle industry could struggle to get access to supplies as tensions with the U.S. and its allies rise. Canada and Australia, with some of the world’s largest lithium reserves, have recently blocked new Chinese investments over national-security concerns.
In the past two years, Chinese companies have spent $4.5 billion acquiring stakes in nearly 20 lithium mines, most of them in Latin America and Africa. Those include investments in countries such as Mali and Nigeria, where they face security threats from terrorism, and places such as Zimbabwe, Mexico and Chile, which have tried to gain greater control over their mineral resources. Zimbabwe recently imposed an export ban on unprocessed lithium, effectively forcing foreign companies to process it there. Mexico just signed a decree to fast-track nationalization of its lithium reserves.
Chile, along with Bolivia and Argentina, is also discussing the creation of a lithium cartel, similar to that of OPEC. Despite the challenges they face, Chinese companies have advantages over their Western counterparts. CATL, for example, is a battery giant, with the political backing of Beijing and a strong network of companies along the supply chain.
Classroom discussion questions:
1. What other rare earths and minerals are needed in the EV and electronics global supply chain?
2. What is the U.S. strategy for dealing with these minerals?