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It is hard to underestimate the role of lithium in Russia's invasion of Ukraine…
- May 25, 2023 12:26 pm GMT
The Wall Street Journal today published the following piece on this vital mineral for developing technology and the new geopolitical scope.
China's Risky Strategy to Control One-Third of the World's Lithium Supply
Beijing's quest to secure metal supplies makes it buy up stakes in mines worldwide.
Before the invasion…
The lithium reserves of Ukraine had garnered worldwide interest from investors in China and Australia who were keen on prospects for the metal. Lithium is a critical component in the manufacture of batteries and plays a significant role in the global shift toward sustainable energy. According to estimates by Ukrainian researchers, the eastern region of Ukraine is believed to possess a substantial reserve of approximately 500,000 tons of lithium oxide, which could potentially rank among the most extensive resources globally. The Russian invasion has detrimentally impacted Ukraine's endeavours to become a significant contributor to the global shift toward clean energy. This shift is crucial in mitigating the adverse effects of climate change. In the latter part of the previous year, Ukraine initiated the process of selling exploration licenses for its lithium deposits and copper, cobalt, and nickel, all of which are essential components of clean energy technology. The pursuit of lithium resources has become a widespread global phenomenon, driven by the anticipated surge in demand for this metal due to the increasing popularity of electric vehicles. There is a growing apprehension that a limited number of countries, such as China, the Democratic Republic of Congo, and Australia, have a significant hold over the global supply of lithium and other minerals crucial for the transition toward clean energy. In summary, the invasion of Ukraine has jeopardized its valuable mineral resources and agricultural production, making it an attractive target for Russia's strategic goals.
China’s Risky Strategy to Control One-Third of the World’s Lithium Supply
Beijing’s quest to secure supplies of the metal is leading it to buy up stakes in mines throughout the developing world
WSJ BY SHA HUA, IN SINGAPORE AND ALEXANDRA WEXLER IN JOHANNESBURG, MAY 24, 2023
Chinese companies have long dominated lithium refining, but their hunt to secure a greater share of the world’s supplies of the metal is leading them to buy up stakes in mines throughout the developing world as they face increasing resistance in Western countries.
It is a risky strategy. China is spending billions on stakes in nations that have histories of political instability, local resistance and resource nationalism. Projects often face protests, regulatory delays and even cancellations.
If China succeeds, however, it could secure access to one-third of the world’s lithium-mine production capacity needed by 2025, according to industry estimates.
Lithium, a soft, silvery metal, is a component in the lithium-ion batteries that power electric vehicles and smartphones. By the end of the decade, demand could outstrip supply by some 300,000 metric tons, according to research firm Benchmark Mineral Intelligence, a consulting firm based in London.
China’s drive to secure a greater hold on the world’s lithium is fueled by concerns that its booming electric-vehicle industry could struggle to get access to supplies as tensions with the U.S. and its allies rise. Canada and Australia, with some of the world’s largest lithium reserves, have recently blocked new Chinese investments over national-security concerns.
China, which has only 8% of the world’s lithium reserves, has “no choice but to try,” said Susan Zou, a vice president at Rystad Energy, a consulting firm based in Norway.
In the past two years, Chinese companies have spent $4.5 billion acquiring stakes in nearly 20 lithium mines, most of them in Latin America and Africa, according to data compiled by Rystad and Benchmark.
Those include investments in countries such as Mali and Nigeria, where they face security threats from terrorism, and places such as Zimbabwe, Mexico and Chile, which have tried to gain greater control over their mineral resources.
In December, Zimbabwe imposed an export ban on unprocessed lithium, effectively forcing foreign companies to process it there. In February, Mexico’s government signed a decree to fast-track nationalization of the country’s lithium reserves. And in April, Chile’s president proposed that private companies would be required to partner with a state-owned company if they want to mine for lithium there.
Chile, along with Bolivia and Argentina, is also discussing the creation of a lithium cartel, similar to that of the Organization of the Petroleum Exporting Countries.
Bolivia, which has enshrined the nationalization of its mineral resources in its constitution, is one of the places where China is investing heavily. The country has around one-fifth of the world’s lithium resources, but it has a history of revoking lithium agreements with foreign companies.
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Potosi, the region where some of Bolivia’s salt flats are located, was once pillaged by the Spanish Empire for its silver, and many residents have been wary of outsiders seeking to exploit its resources.
In 2019, a deal with a Chinese company to extract lithium ground to a halt after then-President Evo Morales, who backed the project, was ousted. That same year, Bolivia threw out another agreement between state-owned lithium company Yacimientos de Litio Bolivianos, or YLB, and a German company after prolonged protests from local residents seeking higher royalties from any subsequent lithium sales.
Chinese companies are, nonetheless, pressing ahead with new projects there. China’s Contemporary Amperex Technology Ltd., the world’s largest battery maker, said in January that it is leading a consortium in a joint venture with YLB.
The civic committee of Potosi, an alliance of unions and social organizations, has already criticized the lack of transparency around the selection process. Bolivia asked participating companies to write a proposal and demonstrate their capabilities, but the results were never made public.
The joint venture isn’t likely to reach its goal of producing 25,000 metric tons of battery-grade lithium carbonate by 2024, lithium experts said. Mining won’t even begin until the Bolivian government passes a new law allowing foreign companies to participate in lithium extraction, said Diego von Vacano, a political-science professor at Texas A&M University and former adviser to the Bolivian government.
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