Lithium projects outside China have been capped by the market, slowing and expanding as lithium prices rise and fall. But domestic investment remained almost unchanged. As a result, China is the only country that can extract lithium from raw materials into finished batteries without relying on imported chemicals or components. This is largely due to a political environment that emphasizes reducing lithium costs rather than maximizing shareholder value.
But China doesn’t produce enough lithium to meet its domestic demand—plus, only about 10 percent of the material in batteries is actually lithium. The country still relies on imports of cobalt, nickel, copper and graphite, which ensures a certain level of mutual cooperation for now. “It’s really an intertwined system,” said battery materials analyst, ” Lithium: The global race for battery dominance and the new energy revolution. “The Western world and China are to some extent interdependent.”
Barron said neither side is interested in starting a trade war, which has led to a slightly uneasy stalemate. “If China decides not to export any EV batteries, Western countries may decide not to export nickel to China,” he said. “There are no refineries in China that produce the highest-purity nickel.”
As both sides invest in energy independence, the balance of power could shift. While the West is racing to build mines and factories, China has begun developing untapped lithium resources in Xinjiang and salt lakes on the Qinghai-Tibet Plateau.This may come with labor costs: a report New York Times Evidence of forced labor has been found in mining operations in Xinjiang, which could be a potential flashpoint if sanctions aimed at protecting the Uighur minority are aimed at preventing Western companies from importing chemicals mined in the region.
Ultimately, lithium is not fundamentally scarce. As prices rise, new technologies may become more economically viable—for example, a way to extract lithium from seawater, or an entirely new type of battery chemistry that doesn’t require lithium at all. In the short term, though, a supply crunch could derail the shift to electric vehicles. “There could be some problems — soaring raw material prices, temporary shortages in the market,” Bednarski said.
If that happens, Chinese automakers will have a huge advantage. Chinese brands such as NIO and Chinese-owned European brands such as MG have launched some of the cheapest electric vehicles on the market in the West. “Chinese-owned Western companies will have a huge advantage over their European or U.S. competitors,” Barron said.
Once commissioned, the lithium plant in Quinana will deliver 24,000 tonnes of Australian lithium hydroxide per year. But lithium mined in Australia, used in batteries made in South Korea and Sweden, and used in electric vehicles sold in Europe and the US, relies on China for every step of its journey. The shell of the old refinery remains a monument to the century-long battle for fossil fuels to reshape the world, but a new race is underway – with China leading the way.
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