While Europe and North America have been investing in a diversified renewable energy portfolio, boosting investment in traditional wind and solar operations while researching other green energy options, China has been investing heavily in metals and minerals, particularly lithium. China is not shying away from renewable energy projects, especially those that will help it remain a key part of the global supply chain, as a shift away from fossil fuels takes place. China is leading the world in lithium production, a vital component in rechargeable batteries – for a variety of electronics and electric vehicles (EVs). As several governments worldwide set plans for a ban on the sale of internal combustion engine (ICE) vehicles, EV sales are expected to soar over the next decade, and China is well-prepared to be at the centre of the lithium market as it happens. So, as countries across Europe and North America gradually expand their lithium operations, will they be able to catch up with China and reduce reliance on the Asian mega-power?
The CEO of American Lithium, Simon Clarke, has spoken out about China’s lithium dominance, warning that the rest of the world has not responded quickly enough to China’s quick rise in the world of lithium mining. Clarke stated, “I just think the Chinese have — I mean you have to take your hat off, they’ve played a great game.” He added, “For decades, they’ve been locking up some of the best assets across the world and quietly going about their business and developing knowledge on building lithium-ion technology, soup to nuts… and we’ve been very slow to react to that.”
One data and market intelligence provider suggested that as much as $42 billion in investment will be required to develop the lithium market in line with demand. And recent moves, such as America’s Inflation Reduction Act (IRA) and the EU’s REPowerEU Plan, have shown that major world powers are just now waking up to the urgency to spend more heavily and act faster to make the shift to renewables. However, China has long been establishing its renewable energy sector, with major operations already up and running. China’s heavy investment in lithium is not surprising, considering that it is a major producer of cell phones, computers, and other electronics that rely on lithium-ion batteries to function. The Asian giant has gradually been building its lithium mining capacity to ensure that it becomes an integral part of the global energy market and supply chain in the decades to come.
The International Energy Agency (IEA) reported this year that China is responsible for around 60 percent of the world’s lithium production. In addition, it produces around 75 percent of all lithium-ion batteries. This is concerning to many world powers who are looking to become more self-sufficient during the transition away from fossil fuels to renewable alternatives. Particularly in response to the Russian invasion of Ukraine, many countries across Europe and North America are looking to reduce their reliance on a few specific world powers for their energy and goods. But if countries hope to reduce their reliance on China for lithium, they will have to act now to establish major lithium operations, supply chains, and markets to avoid China becoming a monopoly.
There is still room in the lithium industry for other regions of the world to develop projects, as demand is set to grow exponentially in response to greater EV uptake. In October, Tony Sage, CEO of Australian firm Critical Metals Corp., stated “A lot of supply is going into China, and China’s own needs are growing… there are another four or five players in Europe also hoping to get into production” and “we are going to be the first.” The firm hopes to establish its position in the global lithium market after going public on Nasdaq through a merger with blank-check company Sizzle Acquisition Corp. Sage highlighted the need to establish a lithium market that does not solely rely on China, “Look at rare earths -- when China needs them for themselves, they stop the exports.” He added, “That’s why Europe makes lithium a critical mineral, for the purpose is to break that sort of reliance on China to produce the concentrate for the batteries.”
And Critical Metals is not the only company looking to develop lithium operations, with French firm Imerys announcing in October its plans to establish a lithium extraction project in the centre of France, for around $1 billion. The company hopes to produce 34,000 tonnes of the white gold starting in 2028, enough to power 700,000 EVs every year. The U.S. is also exploring its potential for lithium production, supported by funding from the IRA. Numerous new and potential lithium projects are already underway in several U.S. states, including Maine, North Carolina, California, and Nevada. Although experts question whether this late development will be enough to respond to the growing global lithium demand without relying on China.
China has quietly become the world’s biggest lithium producer, identifying the likelihood of the sharply growing demand for the white gold early on. While others play catch up, the Asian giant has positioned itself at the centre of the lithium market, and, therefore the electronics and EV battery market. While countries across Europe and North America begin to increase their lithium mining capacity, experts question whether this will be enough to reduce the global demand on China for its lithium in the years to come or if it’s too little too late.
By Felicity Bradstock for Oilprice.com
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