“I don’t think anyone should be shocked,” said Lewis Black, CEO of Toronto-based Almonty Industries, a global mining operator specializing in tungsten. China certainly sees both economic and security advantages to having a dominant market position with lithium batteries. Electrification of the vehicle fleet is seen as beneficial from a pollution standpoint (aside from any climate-related carbon concerns). China is resource constrained in numerous areas compared to its domestic needs.
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The driver for Chinese dominance in lithium battery production starts at home. China is the second-largest shareholder in the largest lithium producer in Chile. Another Chinese company has a long-term agreement to underwrite all lithium raw materials produced in the Australia’s second-biggest, high-grade lithium reserve. For example, IER notes China’s Tianqi Lithium owns 51% of the world’s largest lithium reserve in Australia. What’s more, it has been heavily investing in lithium (and other critical mineral production) throughout the world. The Institute of Energy Research (IER) indicates that China is among the five top countries with the most lithium resources. China has been heavily investing in mining operations in South America and Australia which hold major reserves. Only 23% of battery raw materials come directly from China, but that can be deceptive. China controls 80% of the chemical production of battery grade raw materials (think refining in the oil industry) 61% of cathodes and 86% of anodes (battery components) and 73% of finished lithium-ion batteries. London-based research firm Benchmark Mineral Intelligence recently outlined the scope of the issue, showing Chinese dominance throughout the lithium-ion battery to electric vehicle (EV) supply chain. Now, with the remarkably rapid push for electrification of the vehicle fleet among various governments, are we moving toward a return to an OPEC-like scenario now focused on China? Similarly, these new sources of oil expand and decentralize future supply in the oil markets.
The United States now enjoys a significant degree of not only independence but also actual dominance with crude and natural gas. The rise of fracking strained the OPEC+ leverage. OPEC had been working to realign the supply and demand equation to favor the oil producers, and this event firmly established the producers as the dominant partner in the relationship. While this action had a political face, it also had economic underpinnings. support of Israel during the Arab-Israeli war by instituting an oil boycott and a production cut. The Organization of Petroleum Exporting Countries reacted to the U.S. Something extraordinary happened in 1973-the United States and various aligned nations found themselves at the mercy of a handful of small, underdeveloped countries located in the Middle East. Beijing’s dominance of the lithium battery market raises questions with the rush toward EVs.
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