The World Can’t Wean Itself Off Chinese Lithium

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Lithium projects outside of China have been at the mercy of markets, slowing and expanding as the price of lithium flows up and down. But domestic investment has been almost constant. As a result, China is the only country that can carry lithium from raw material to finished batteries without having to rely on imported chemicals or components. This is mainly due to a political environment that emphasizes reducing the cost of lithium rather than maximizing shareholder value.

But China doesn’t produce enough lithium to satisfy its domestic appetite, and besides, only 10 percent of the material that goes into a battery is actually lithium. The country still depends on imports of cobalt, nickel, copper and graphite, which ensures a certain degree of mutual cooperation at the moment. “It’s really an intertwined system,” says Lukasz Bednarski, a battery materials analyst and author of Lithium: the global race for battery mastery and the new energy revolution. “The Western world and China are a kind of co-dependents.”

Neither side is interested in starting a trade war, which has sparked a slightly awkward confrontation, Barron says. “If China decides not to export any electric vehicle battery, Western countries could decide not to export nickel to China,” he says. “China does not have refineries to produce nickel of the highest purity.”

The balance of power could change as both sides invest in energy independence. As the West rushes to build mines and factories, China begins to exploit unexploded lithium sources in Xinjiang and the salt lakes of the Tibetan plateau. This could have a human cost: a report The New York Times found evidence of forced labor in Xinjiang’s mining operations, which could be a potential flashpoint if sanctions designed to protect the Uyghur minority prevent Western companies from importing extracted chemicals into the region.

In short, lithium is not fundamentally scarce. As prices rise, new technologies could become more economically viable: a way to extract lithium from seawater, for example, or a whole new type of battery chemistry that eliminates the need for lithium altogether. In the short term, however, supply crises could disrupt switching to electric vehicles. “There may be hiccups, years in which the price of raw materials soars and there are temporary shortages in the market,” Bednarski says.

Chinese carmakers will have a big advantage if that happens. Already, Chinese brands like Nio and European Chinese-owned brands like MG are launching electric vehicles in the West that are the cheapest on the market. “Western Chinese-owned companies will have a huge advantage over their European or American competitors,” Barron says.

Once operational, the Kwinana lithium plant will ship 24,000 tonnes of Australian lithium hydroxide a year. But this lithium, mined in Australia for batteries built in South Korea and Sweden and destined for electric vehicles sold in Europe and the US, depends on China at every step of its journey. The shell of the old oil refinery still stands as a monument to the centennial struggle for fossil fuels that reshaped the world, but a new race is underway, and China is in the driving seat.

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