China’s control of the global lithium supply chain poses high risks for U.S. downstream companies as Chinese companies continue to expand their footprint in overseas lithium mines.
“We love our suppliers and have a very strong relationship, but we are very dependent on supplies from China. … We think there are risks in terms of stability of supply, given that everything happens geopolitically,” Tim Karimov, president of American lithium battery manufacturer OneCharge, said during a presentation at the MODEX 22 seminar.
MODEX is the largest manufacturing and supply chain trade show held in North and South America. MODEX 22 took place March 28-31 at the Georgia World Congress Center in Atlanta.
In January, OneCharge published a white paper discussing the role of the United States in global lithium battery manufacturing and the risks China poses to the supply chain.
“China currently dominates the global lithium battery supply chain. More than 70% of the total global Li-ion battery manufacturing capacity is controlled by China. … Should China decide to limit supply or dramatically increase prices, it would hurt the U.S. transportation and logistics sectors, which are rapidly adopting lithium-battery electric vehicles,” the report said.
According to Chinese digital newspaper The Paper, BYD Co. Ltd. (01211.HK), a Chinese conglomerate and electric vehicle maker, is currently in talks to buy six lithium mines in Africa containing more than 27 million tonnes of 2.5 percent-grade lithium oxide – enough to supply at BYD 10 years of lithium oxide.
Electric vehicle manufacturers are under pressure due to soaring lithium prices for electric vehicle batteries amid growing demand for electric vehicles. As a result, many companies have also entered the global race to acquire lithium mines.
China’s lithium sources come mainly from environmentally fragile areas, such as the Qinghai-Tibet Plateau, with a harsh natural environment, poor infrastructure and significant technical challenges. Despite these challenges, Beijing has actively encouraged Chinese state-backed companies to secure overseas lithium mines to outperform Europe and the United States in the new energy sector, according to the news outlet. Chinese state Yicai.
Chinese control of critical lithium resources
The lithium industry has a high degree of market concentration. In 2020, five companies accounted for nearly half of global lithium production capacity, producing around 75% of global supply, according to a report released by the China Merchants Bank Research Institute on March 4.
Two of the five companies – Jiangxi Ganfeng Lithium Co. Ltd. (01772.HK) and Tianqi Lithium Co. Ltd. (02466.SZ) – are Chinese. Both companies have taken significant stakes in the world’s lithium resources, giving them control over the lithium supply chain.
Chinese battery giant Ganfeng Lithium’s overseas footprint in lithium resources spans Australia, Argentina and Ireland, according to its 2021 Annual Report.
Among them, the Mount Marion project in Australia is Ganfeng’s largest source of lithium supply. Ganfeng secures the stable supply of raw materials by signing long-term supply agreements with upstream lithium suppliers after investing in them.
chinese giant Tianqi Lithium has also secured its lithium supplies by buying shares of leading companies in the upstream lithium supply chain on a massive scale. In 2014, Tianqi Lithium acquired 51% of the shares of Windfield Holdings, the shareholder of Talison Lithium, which owns the Greenbushes lithium deposit in Western Australia, the largest hard rock lithium mine in the world.
And in 2018, Tianqi Lithium bought a 23.77% stake in SQM, a world leader in brine-based lithium production. The company has since become SQM’s second largest shareholder.
