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The World Can’t Wean Itself Off Chinese Lithium
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Amit Katwala

Science
Jun 30, 2022 7:00 AM


THE WORLD CAN’T WEAN ITSELF OFF CHINESE LITHIUM

China dominates the global supply chain for lithium-ion batteries. Now rival
countries are scrambling for more control over “white oil.”
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ILLUSTRATION: ABBR. PROJECTS

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CHINA'S ELECTRIC DREAM

Western automakers built their fortunes on the internal combustion engine. Now
China has ambitions to define the electric vehicle age.


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The industrial port of Kwinana on Australia’s western coast is a microcosm of
the global energy industry. From 1955, it was home to one of the largest oil
refineries in the region, owned by British Petroleum when it was still the
Anglo-Persian Oil Company. It once provided 70 percent of Western Australia’s
fuel supplies, and the metal husks of old tanks still dominate the shoreline,
slowly turning to rust in the salt air.

The refinery shut down in March 2021, but it isn’t just oil below the region’s
red soil: Australia is also home to almost half of the world’s lithium supply.
The trucks and machinery are humming once again, but now they’re part of a race
to secure the clean energy sources of the future—a race being dominated by
China.

Over the past 30 years, lithium has become a prized resource. It’s a vital
component of batteries—for the phone or laptop you’re reading this on, and for
the electric vehicles that will soon rule the roads. But until recently, the
lithium mined in Australia had to be refined and processed elsewhere. When it
comes to processing lithium, China is in a league of its own. The superpower
gobbled up about 40 percent of the 93,000 metric tons of raw lithium mined
globally in 2021. Hundreds of so-called gigafactories across the country are
churning out millions of EV batteries for both the domestic market and foreign
carmakers like BMW, Volkswagen, and Tesla.



China’s share of the market for lithium-ion batteries could be as high as 80
percent, according to estimates from BloombergNEF. Six of the 10 biggest EV
battery producers are based in China—one of them, CATL, makes three out of every
ten EV batteries globally. That dominance extends through the supply chain.
Chinese companies have signed preferential deals with lithium-rich nations and
benefited from huge government investment in the complex steps between mining
and manufacturing. That’s made the rest of the world nervous, and the United
States and Europe are now scrambling to wean themselves off Chinese lithium
before it’s too late.

An electric car battery has between 30 and 60 kilos of lithium. It’s estimated
that by 2034, the US alone will need 500,000 metric tons of unrefined lithium a
year for EV production. That’s more than the global supply in 2020. Some experts
fear a repeat of the oil crisis sparked by Russia’s invasion of Ukraine, with
geopolitical tension spilling over into a war of sanctions. Such a scenario
could result in China shutting off its supply of batteries just as Western
automakers need them to power the switch to EVs.



“If China decides to stick with the home market, lithium-ion batteries are going
to be more expensive outside China,” says Andrew Barron, a professor of low
carbon energy and the environment at Swansea University. That makes Western
efforts to expand battery production capacity “more imperative than ever,” he
says.



Those efforts are taking shape, albeit slowly. If everything goes to plan, there
will be 13 new gigafactories in the United States by 2025, joined by an
additional 35 in Europe by 2035. (That’s a big if, with many projects beset by
logistical problems, protests, and NIMBYism, most notably Tesla’s controversial
gigafactory near Berlin.)

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But those gigafactories are going to need lithium—and lots of it. In March, US
president Joe Biden announced plans to use the Defense Production Act to fund
domestic mining of lithium and other critical battery materials under the
auspices of national security. Across the Atlantic, the European Union is
advancing legislation to try and create a green battery supply chain within
Europe, with a focus on recycling lithium.



But there’s an important piece missing between mine and manufacturing. Turning
lithium ore into the purer lithium carbonate or lithium hydroxide needed for
batteries is an expensive and complex operation. It takes years to get a lithium
processing plant or gigafactory off the ground, and it could take decades and an
estimated $175 billion for the US to catch up to China. China controls at least
two-thirds of the world’s lithium processing capacity, and it’s this more than
anything that could give it a stranglehold on the battery market for years to
come.

Without urgent investment in this middle step, lithium pulled from new mines in
the US and Europe might still need to be shipped to Asia and back again to be
refined before it can be used in electric cars—increasing emissions,
compromising energy independence, and handing China a trump card.

On the surface Kwinana appears to be a step in the right direction. A new
lithium processing plant has been built to the north of the old refinery, and in
May it successfully turned a lithium ore called spodumene into battery-ready
lithium hydroxide for the first time. But even that doesn’t give Australia the
ability to refine and freely sell its own lithium. The plant is a joint venture,
and its majority shareholder is Tianqi Lithium, a Chinese mining and
manufacturing company that controls almost half of the world's lithium
production.

In the global battery supply chain, China is everywhere. Tianqi Lithium also
owns stakes in SQM, Chile’s biggest mining company, and Greenbushes, Australia’s
biggest lithium mine. Both Tianqi Lithium and its domestic rival Ganfeng Lithium
have signed deals across South America’s “lithium triangle,” a mineral-rich part
of the Andes at the junction of Argentina, Bolivia, and Chile. It’s a similar
story for other rare-earth materials needed for batteries: China controls 70
percent of the mining industry in the Democratic Republic of the Congo, home to
almost all of the world’s cobalt, another critical component of lithium-ion
batteries.

In addition to locking down global lithium supplies, China has also started to
expand domestic production—it’s now the third biggest producer of lithium behind
Australia and Chile, even though it holds less than 10 percent of the world’s
supply.

This dominance didn’t happen overnight. In 2015, China made lithium a national
priority as part of its “Made in 2025” industrial strategy. An estimated $60
billion in electric vehicle subsidies helped create a market and the battery
supply chain to go with it. Battery companies have invested billions in domestic
sources of lithium in a way that’s been impossible elsewhere in the world.

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

But China isn’t producing nearly enough lithium to satisfy its domestic
appetite—and besides, only about 10 percent of the material that goes into a
battery is actually lithium. The country still relies on imports of cobalt,
nickel, copper, and graphite, which ensures a degree of mutual cooperation for
now. “It’s really an interwoven system,” says Lukasz Bednarski, a battery
materials analyst and author of Lithium: The Global Race for Battery Dominance
and the New Energy Revolution. “The Western world and China are sort of
codependent.”

Neither side is interested in starting a trade war, which has resulted in a
slightly uneasy standoff, Barron says. “If China decides not to export any
electric vehicle batteries, countries in the West could decide not to export the
nickel to China,” he says. “China doesn’t have the refineries to produce the
highest purity nickel.”

The power balance might shift as both sides invest in energy independence. While
the West races to build mines and factories, China is starting to exploit
untapped sources of lithium in Xinjiang and the salt lakes of the Tibetan
plateau. That might come with a human cost: a report by The New York Times found
evidence of forced labor at mining operations in Xinjiang, which could be a
potential flash point if sanctions designed to protect the Uyghur minority were
to stop Western companies from importing chemicals mined in that region.



Ultimately, lithium isn’t fundamentally scarce. As prices rise, new technologies
could become more economically viable—a way to extract lithium from seawater,
for instance, or an entirely new type of battery chemistry that does away with
the need for lithium altogether. In the short term, though, supply crunches
could disrupt the switch to EVs. “There might be hiccups—years when the price of
raw material skyrockets and there are temporary shortages on the market,” says
Bednarski.

Chinese car manufacturers will have a huge advantage if that happens. Already,
Chinese brands like Nio and Chinese-owned European brands like MG are launching
EVs in the West that are the cheapest on the market. “Chinese-owned Western
companies will have a massive advantage over their European or US competitors,”
says Barron.

Once operational, the lithium plant in Kwinana will ship 24,000 tons of
Australian lithium hydroxide a year. But that lithium, mined in Australia for
batteries built in South Korea and Sweden and destined for EVs sold in Europe
and the US, is reliant on China at every step of its journey. The shell of the
old oil refinery still stands as a monument to the century-long scramble for
fossil fuels that reshaped the world, but there’s a new race underway—and China
is in the driving seat.






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Amit Katwala is a senior writer at WIRED with a focus on longform features,
science, and culture. He graduated from the University of Oxford with a degree
in experimental psychology, and is the author of two books: The Athletic Brain,
about the rise of neuroscience in sport, and a WIRED... Read more
Senior writer
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TopicsBatteriesChinaIndustryElectric VehiclesEnergyclimate
changemanufacturingenvironmentChina’s Electric Dream




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