China is not at risk of losing its dominant position in the lithium supply chain despite ongoing discussions over the creation of a cartel for the metal similar to the one that regulates the global supply of oil, analysts said, as worldwide competition ramps up for the strategic resource seen as pivotal in decarbonization efforts. The Foreign Ministers of Argentina, Chile, and Bolivia – known collectively as the so-called lithium triangle owing to their majority share of the world’s identified lithium reserves – are discussing a possible agreement on the production and pricing of the metal, which is an essential component in electric vehicle batteries. “It’s unlikely that a lithium organization would be effective enough to challenge the dominance China has,” said Chloe Herrera, Analyst with Lux Research. The three countries of the lithium triangle collectively account for around 56% of the world’s identified lithium reserves, according to estimates from the U.S. Geological Survey, with Argentina and Chile responsible for around 32% of global production. Although Bolivia is believed to be home to the world’s largest lithium deposits, it has so far struggled to launch its mining industry.
“China’s main advantage is that it controls most of the lithium conversion capacity in the world. Most lithium still needs to pass through China before being used in cathodes and electrolytes,” added Herrera. Lithium conversion – also known as lithium refining – is the processing of the raw compound into a form usable in the manufacturing of electric vehicle batteries, such as lithium carbonate or lithium hydroxide. Although China accounts for less than 6% of global lithium reserves, it controls over 60% of the world’s lithium refining capacity, according to research by Gavekal Dragonomics, and up to 80% of global lithium-ion battery manufacturing.
Chinese investment in lithium projects around the world could provide leverage in any Opec-style negotiations, said Chris Berry, President and Founder of House Mountain Partners, a consultancy firm specializing in energy metals. “I doubt any Opec-style arrangement is feasible or would have any impact on the lithium market any time soon, if ever,” he said. The vastly different means of lithium extraction, from traditional mining to large evaporation pools, also makes standardization across markets difficult to achieve, he said. “Trying to establish a single price for multiple forms of lithium and multiple grades is a fool’s errand,” Berry added.
The growing sales of electric vehicles and efforts to achieve carbon neutrality have led to skyrocketing demand for lithium in recent years, driving prices to astronomic levels. In 2022, the spot price of processed lithium carbonate shot up by at least 179% to CNY542,000 per ton, according to S&P Global Commodity Insights, from less than CNY40,000 in November 2020. There were 29 lithium producing companies in 2021, but that number is expected to increase to 60 by 2024. Although investments outside China will increase, the country is expected to retain its dominant position in the near future, the South China Morning Post reports.
Canada’s government has ordered three Chinese firms to divest from three of small lithium miners based in the country, days after introducing tougher rules on foreign investments in the critical minerals sectors. Sinomine (Hong Kong) Rare Metals Resources Co is required to divest from Vancouver-based Power Metals Corp, while Chengze Lithium International must exit from Calgary-based Lithium Chile. Zangge Mining Investment (Chengdu) Co was ordered to divest from Ultra Lithium, based in Vancouver. The government ordered the divestiture after “rigorous scrutiny” of foreign firms by Canada’s national security and intelligence community, Industry Minister Francois-Philippe Champagne said in a statement.
