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Asia and Pacific

China’s Monopoly of the World’s Lithium, and the Danger to US Markets and Renewable Energy Efforts

Photo by Reinhard Jahn

As of 2022, the United States was producing approximately 1% of the world’s lithium, all of which comes from Albemarle’s Silver Peak in Nevada. There are no other functioning lithium mines in the country. Despite other potential mining sites in the United States being considered and developed, the US is producing only 1/75th of their projected lithium demand in future years. Because of this, the US is considering mining and purchasing lithium from outside the US.

Lithium is a naturally occurring element, found mainly in mineral springs and igneous rocks. Many of these mineral springs are located under vast expanses of “salt flats.” The mineral has historically been used in the process of creating ceramics and decorative glasses, but today the main use of lithium is the manufacturing of rechargeable lithium-ion batteries to power electric vehicles (EV) and consumer electronics such as cellphones, laptops, and tablets. Most of the lithium in the world is found in South America, Australia, and China. In South America, Bolivia, Argentina, and Chile create what is known as the lithium triangle; the area on the border of those countries with salt lakes and salt flats is rich in lithium.

In addition to their ample supply of lithium, China controls the industry of lithium processing; 60% of lithium is processed within China’s borders. The CEO of American Lithium, a Canadian company which funds and develops lithium projects throughout the American continents, asserted that other countries in the world have been slow to respond to China’s near monopoly of the lithium industry. The Chinese Communist Party supports the funding of industries related to lithium and other earth metals, and the PRC has many state-owned and state-supported companies that invested in lithium mines and manufacturing companies overseas. This includes companies in Africa, Latin America, and Canada. In July of 2022, China made agreements to acquire Lithia, an Argentina-based lithium mining company, for just under a billion dollars.

Recently, the United States has become concerned about China’s reach in international trade as the Russian invasion of Ukraine brought to light the negative aspects that accompany economic ties with hostile nations. The market and trade disruptions that followed international sanctions on Russian industries reignited Western countries’ desires to ensure that industrial supply chains are controlled by allies. For example, Canada was one such country that attempted to limit non-allied control of earth metals; late last year Canadian courts ordered Chinese company Chengze Lithium International Ltd. to sell its shares in the Canadian company Lithium Chile Inc.

Following Canada’s example, the United States has also attempted to curb reliance on foreign lithium. Last year, President Biden announced millions of dollars in investments for companies engaged in (the planning of) lithium mining in California. The Salton Sea, located in Southern California, has not yet been developed for lithium extraction, but US government officials have stated that its deposits have the potential to limit US dependence on Chinese lithium.

Despite these efforts to curb the growth of Chinese influence in the rare metals industry, Chinese companies continue to expand. In 2022, the Chinese EV and lithium battery manufacturer named BYD surpassed Tesla in global EV sales. Furthermore, the only mine in Africa that produces lithium is currently controlled by a Chinese company; Sinomine Resources has released plans to extract five million tons of lithium from the Zimbabwe mine by June 2023.

In January 2023, Bolivia’s state-owned mining company announced their partnership with a group of Chinese companies to begin lithium extraction operations in Bolivia. One company of note included in this coalition of Chinese firms is Contemporary Amperex Technology Co. Ltd. (CATL). CATL is the world’s largest lithium chemical consumer, making it highly motivated to secure its supply of lithium in Bolivia and elsewhere.

American countries were among CATL competitors bidding for the same partnership with the Bolivian government. EnergyX, which has been working to improve the technology behind lithium extraction, was one such company. Their CEO, Teague Egan, explained that US companies continue to fall behind their Chinese competitors because the People’s Republic of China (PRC) government is willing to subsidize investments in lithium resources. He also noted that Chinese companies have focused on lithium for years, well before American companies began to build their supply chains.

Bolivia also announced it is still considering other firms for potential partnerships, though it was unclear if those partnerships would take part in the current $1 billion project or if they would work on future lithium mining projects. The foreign competitors include US company, Lilac Solutions, as well as companies from Russia and China.

The partnership of Chinese firms with the Bolivian government is problematic as a large portion of the world’s lithium is found in South America (sources disagree but anywhere from 30-60% of the world’s lithium is likely found in the lithium triangle). This deal with Bolivia gives China the foothold the country needs to control the lithium industry in Argentina and Chile even more than it currently does. The deal illustrates China’s push for enhanced economic dominance in lithium extraction and refinement; therefore, such efforts for economic prowess, can be construed as a threat to American businesses and US economic autonomy.

When taken into consideration, this potential threat is profound as the US demand for lithium batteries is projected to grow in coming years. Current estimates state that by 2030 demand for lithium batteries will measure more than three million metric tons. Likewise, more than 95% of the world’s lithium manufacturing will be used to create batteries.

The demand for more lithium batteries is likely due to the projected rise in demand for Electric Vehicles. On August 5th, 2021 President Joe Biden signed an executive order announcing his goal that by 2030, 50% of all vehicles sold in the United States will be EVs. A year before Biden’s order, in California, Governor Gavin Newsom signed an executive order requiring that all cars sold after 2035 must be EVs (or otherwise be deemed a zero emissions vehicle). A number of other states have followed California and passed similar laws in recent years. Because of these laws, the US demand for EVs will rise dramatically in the coming decade and with China’s new control of the lithium industry, US companies will be forced to deal with Chinese companies to manufacture EVs and other electronic devices using lithium-ion batteries.

If the US makes no changes in their policies addressing the subsidization and prioritization of lithium production, they may face three detrimental consequences:

First, the United States may be forced to use batteries, and other technology containing lithium, manufactured by Chinese companies potentially leading to “cyber espionage.” If Chinese technology companies gain a market in the United States, the PRC government could gain access to sensitive information about their US customers. Chinese-designed and manufactured technologies have previously been deemed a risk to US national security. In particular, in May of 2019 the US banned Huawei—a 5G network provider—from selling their goods to US companies or building their equipment in the United States to prevent a potential security breach.

Second, the PRC could potentially be able to withhold lithium batteries, and EVs, from US markets. The PRC, which has historically been hostile to the United States, may withhold these goods to cripple the Washington’s economy and subsequently become the world’s economic leader. Given the recent push from federal and state governments to use EVs, China’s withholding of lithium and lithium batteries would certainly have the potential to cause significant damage to the US economy.

Finally, if the US is dependent on Chinese markets for lithium, the US may lose its bargaining power over the PRC. The US may no longer be able to impose economic sanctions or freeze trade negotiations with China when pushing for progress in human rights or when protesting Chinese aggression against foreign powers. Instead, China could have advantage in the field of international relations and diplomatic bargaining. Regardless of China’s current or future actions, the US would be forced to do all it can to maintain a diplomatic relationship with the PRC.

To avoid these issues, the US legislature is considering bills which subsidize and benefit companies that invest in, mine, and process lithium and other earth metals, which will be crucial in limiting US dependence on Chinese batteries and EVs. One example is the COBALT Act, which attempts to increase the National Defense Stockpile of cobalt, a rare earth metal used to build jet engines, create alloys for munitions, and improve stealth technology. Another example of Washington attempting to discourage China’s economic growth is the efforts of aforementioned investment of federal funds into lithium mining in California. The next decade will determine whether these actions, and potential additional actions in the future, will allow the US succeed in their goals to achieve dependence from foreign lithium.