How the U.S. Is Investing Billions to Compete With China’s Lithium Supply Chain | WSJ U.S. vs. China

Summary

The global demand for lithium, a key component in green energy and electric vehicle batteries, is soaring, with China leading as the largest processor, controlling 55% of the market. However, China's reliance on foreign lithium sources poses a supply chain risk, prompting investments in African and Latin American mines. Meanwhile, the US, seeking to secure its own supply chain, is ramping up domestic lithium production efforts, spurred by the Inflation Reduction Act, despite the challenges of building new refineries and the lengthy process of establishing new mines.

Takeaways

• 🌟 Lithium is a critical component in batteries and is essential for the transition to green energy, with demand expected to reach nearly 2.5 million metric tons by 2028.
• 🏆 China is the world's largest lithium processor, controlling 55% of the market and aiming to secure one third of the world's raw lithium supply.
• 💡 The US is reliant on China for lithium processing and is working to develop its own supply chain to reduce this dependence.
• 🔍 China's lithium supply chain has a weak link as it relies heavily on foreign sources for raw lithium, including from US allies.
• 📈 Global lithium prices have surged, with an auction for the Jiada Lithium Mine closing at 1300 times its starting price, reflecting high demand and competition.
• 🚧 Lithium is abundant but often difficult and expensive to extract, leading to Chinese companies seeking investments in riskier regions like Africa and Latin America.
• 🛑 Some countries are tightening control over lithium mining, with examples of Australia blocking sales to Chinese companies and Canada ordering divestments.
• 🌍 Chinese investments in developing countries are seen as risky due to unstable political regimes and underdeveloped infrastructure.
• 🛠️ Resource nationalism is on the rise, with countries aiming to add value to their resources by processing lithium domestically rather than exporting raw materials.
• 🚀 The US is making efforts to secure its lithium supply chain through the Inflation Reduction Act, which offers tax credits and subsidies to encourage domestic lithium production.
• 🏗️ Despite plans for new lithium extraction and processing facilities in the US, many are still in the planning stages, with construction times lengthy, as exemplified by Thacker Pass Mine.

Q & A

What is the significance of lithium in modern technology and energy transition?

Lithium is a critical component in batteries, which are essential for the world's transition to green energy and electric vehicles. Its light weight and high energy density make it invaluable for achieving climate goals and electrifying the world.

What is the projected demand for lithium by 2028?

The global demand for lithium is expected to reach nearly 2.5 million metric tons by 2028, indicating a significant surge in demand for this metal.

Why is China considered the world's largest lithium processor?

China controls 55% of the lithium processing market due to its significant investments in domestic lithium refineries in the 2000s and its focus on electrifying transportation and scaling up electric vehicles.

How does China's reliance on foreign lithium sources pose a risk to its supply chain?

China's reliance on foreign countries for raw lithium exposes it to supply chain vulnerabilities, as it is subject to geopolitical tensions and potential restrictions by countries friendly with the United States.

What measures are countries taking to control their lithium resources?

Some countries, like Australia and Canada, are blocking sales of lithium mines to Chinese companies. Additionally, nations like Zimbabwe are banning the export of raw lithium, forcing companies to process it within their borders.

What is the concept of 'resource nationalism' mentioned in the script?

Resource nationalism refers to the strategy of developing countries to add value to their natural resources by processing them domestically instead of exporting raw materials, aiming to gain more revenue and develop their industries and labor force.

Why are Chinese companies investing in lithium mines in Africa and Latin America?

Chinese companies are investing in these regions due to the risks associated with relying on US-allied countries for lithium. These investments are seen as a way to secure a more stable and diversified supply chain.

What is the current state of lithium mining and processing in the US?

Lithium mining in the US died out in the 20th century due to cheaper harvesting methods in South America. The US currently processes very little lithium domestically and is reliant on China for lithium processing.

How is the US working to secure its own lithium supply chain?

The US is increasing efforts to tap into its own lithium deposits and construct domestic lithium refineries, driven by the Inflation Reduction Act and the demand for green energy sources. Tax credits and subsidies are being used to incentivize domestic lithium production.

What is the significance of the Thacker Pass mine for the US lithium supply chain?

The Thacker Pass mine, owned by Lithium Americas, contains one of the largest known lithium sources in the US. It is the only project in North America that is permitted and in construction, highlighting the infancy of the US lithium supply chain.

What are the challenges faced by Chinese companies in securing lithium resources abroad?

Chinese companies face geopolitical risks, unstable political regimes in developing countries, underdeveloped infrastructure, and concerns about US allied countries limiting their access to lithium as they secure resources abroad.

Outlines

00:00

🔋 The Global Lithium Surge and China's Dominance

This paragraph discusses the critical role of lithium in the transition to green energy and its increasing demand, projected to reach nearly 2.5 million metric tons by 2028. It highlights China's position as the world's largest lithium processor, controlling 55% of the market. The paragraph also touches on China's strategy to secure raw lithium from abroad, particularly in Africa and Latin America, to maintain its competitive edge in the lithium battery market. The US's reliance on China for lithium processing and the challenges faced by China due to its dependence on foreign raw materials are also covered.

05:00

🌍 China's Supply Chain Vulnerabilities and Resource Nationalism

The second paragraph delves into the risks and challenges associated with China's lithium supply chain. It explains that despite being the largest processor, China relies heavily on foreign sources for raw lithium, which exposes it to geopolitical and market risks. The concept of 'resource nationalism' is introduced, where developing countries seek to add value to their resources by processing them domestically rather than exporting raw materials. The paragraph also discusses the US's efforts to revive its lithium industry and reduce reliance on China, spurred by the Inflation Reduction Act and the growing demand for green energy. The challenges of building new lithium extraction and processing facilities in the US are highlighted, with a specific mention of Exxon Mobil's plans and the lengthy development timeline of the Thacker Pass mine.

Keywords

💡Lithium

Lithium is a lightweight, silvery-white metal that is highly reactive and is a key component in batteries, particularly those used in electric vehicles and green energy technologies. In the video, lithium is referred to as the 'white gold of the electric age,' highlighting its critical role in the global transition to renewable energy sources. The demand for lithium is surging, with China aiming to control one third of the world's raw lithium supply to meet this demand.

💡Lithium Surge

The term 'lithium surge' refers to the rapid increase in demand for lithium due to its importance in battery technology and the shift towards electric vehicles and renewable energy. The script mentions that this surge is expected to reach nearly 2.5 million metric tons by 2028, indicating the scale of the global push for cleaner energy solutions.

💡Lithium Processor

A lithium processor is an entity that refines raw lithium into components suitable for use in batteries and other applications. China is identified as the world's largest lithium processor in the video, controlling 55% of the market. This role is crucial as it allows China to influence the supply chain and ensure a steady flow of lithium for its industries.

💡Supply Chain

The supply chain in the context of the video refers to the series of activities involved in the production and distribution of lithium, from extraction to processing and eventual use in batteries. China's efforts to secure raw lithium abroad and its domestic processing capabilities are central to its lithium supply chain strategy.

💡Green Energy

Green energy, also known as clean or renewable energy, comes from natural resources such as sunlight, wind, and rain that are replenished at a higher rate than they are consumed. The video discusses the critical role lithium plays in batteries for electric vehicles and energy storage, which are essential for the transition to green energy.

💡Electric Vehicles (EVs)

Electric vehicles are vehicles that are powered by electric motors and typically use rechargeable batteries for energy storage. The video notes that China has the largest market for electric cars, with around 60% of global EV sales, which underscores the significant demand for lithium batteries in this sector.

💡Resource Nationalism

Resource nationalism is a term used to describe the policies of national governments to exert greater control over their natural resources. The video mentions that countries like Zimbabwe are banning the export of raw lithium and instead requiring processing within their borders, which is an example of resource nationalism in action.

💡Investment

In the context of the video, investment refers to the financial contributions made by countries or companies to secure access to lithium resources. China is highlighted as making risky major investments in lithium mines in Africa and Latin America to secure its supply.

💡Refineries

Refineries are industrial plants where raw materials are processed into finished products. The script explains that lithium compounds are transformed into battery components in refineries, and China specializes in this processing, handling about 55% of the world's raw lithium.

💡Inflation Reduction Act

The Inflation Reduction Act is a legislative measure in the US aimed at reducing inflation and promoting green energy sources. The video mentions that this act provides tax credits and subsidies that make producing lithium in the US more attractive, encouraging domestic investment in lithium refineries.

💡Lithium Cartel

A lithium cartel would be a group of countries that collaborate to control the production and sale of lithium, similar to OPEC's control over oil. The video discusses the possibility of Chile, Bolivia, and Argentina creating a lithium cartel, which could impact global lithium supply and pricing.

Highlights

Lithium is a critical component in batteries and the transition to green energy, with a projected demand surge to nearly 2.5 million metric tons by 2028.

China is the world's largest lithium processor, controlling 55% of the market and seeking to secure one third of the world's raw lithium supply.

China's investments in lithium mines in Africa and Latin America aim to mitigate risks in its lithium supply chain.

The US is working to develop its own lithium supply chain to reduce reliance on China's processing.

Lithium is dubbed the 'white gold of the electric age', highlighting its value in modern technology and energy solutions.

China's domestic lithium refineries were significantly invested in during the 2000s, boosting its processing capabilities.

China's electric car market, accounting for around 60% of global sales, drives demand for lithium batteries.

Lithium's importance is underscored by its role in achieving climate goals and electrifying the world.

China's supply chain vulnerability is exposed by its reliance on foreign raw lithium, including from US allies.

Global lithium prices have surged, with an auction in Sichuan receiving over 11,000 bids and prices skyrocketing.

Difficulties in lithium extraction, often expensive and challenging, affect China's ability to mine domestically.

Political and infrastructure risks in Africa and Latin America are part of China's strategy for securing raw lithium.

Nations are tightening control over lithium mines, with Zimbabwe banning raw lithium exports to encourage domestic processing.

Resource nationalism is driving some countries to add value to their resources by processing lithium domestically.

Chinese investments in lithium in developing countries are seen by some as a path to a stronger future supply chain.

The US faces challenges in reviving its lithium mining and refining industries, with a history of cheaper alternatives abroad.

The Inflation Reduction Act in the US provides incentives for domestic lithium production, with companies like Exxon Mobil planning large processing facilities.

Despite plans, many lithium extraction plants in the US are not yet built, indicating a long road ahead for domestic supply chain development.

Lithium's essential role in decarbonization technologies makes it a sought-after metal by countries worldwide.

Transcripts

- [Narrator] This little chunk of metal contains lithium.

So does this cell phone and this electric car.

The super light metal is a critical component

in batteries and the world's transition to green energy.

It's ignited a global lithium surge in demand

which is expected to reach

nearly 2.5 million metric tons by 2028.

- Lithium is the white gold of the electric age.

- [Narrator] China has become

the world's largest lithium processor,

controlling 55% of the market.

To fuel its lithium supply chain,

China needs to secure raw lithium abroad.

It's making risky major investments in lithium mines

in Africa and Latin America in hopes of controlling

one third of the world's raw lithium supply

as it competes with countries around the world

to feed a growing demand for lithium batteries.

Here's why experts say China is trying to protect

and expand its raw lithium sources

and how the US is struggling

to develop its own supply chain.

Before lithium ends up in all of these,

it first has to be processed in refineries like this one

which transforms lithium compounds into battery components.

China specializes as the world's largest lithium processor,

processing about 55% of the world's raw lithium.

After processing the mineral, it stays in China

or could travel to Japan or South Korea

to be turned into battery components.

Those batteries are then shipped around the world,

including the US.

The US processes very little lithium domestically,

and it's reliant on China's lithium processing.

China, on the other hand, made significant investments

in its domestic lithium refineries in the 2000s.

- China started doing it because you need a lot of energy

for refining and you also need the stomach

'cause it's a little bit of a sort of dirty thing to do.

China manufactured a lot of these appliances,

just got interested in it and got good in it.

And then of course there was also this push

by the Chinese government to electrify transportation

and scale up electric vehicles.

- [Narrator] China currently has the largest market

for electric cars, with around 60%

of global electric car sales.

And those cars need lithium batteries,

fueling China's demand for a reliable lithium supply chain.

- Lithium is just incredibly valuable

because it's an essential component in the technologies

that we need in order to achieve a lot of our climate goals

and to electrify the world.

Now in China's case,

it's just been a little bit ahead of the curve.

So for them, in order to maintain their lead

and in order to actually make the things that they do,

they need a supply of lithium.

- [Narrator] But China's supply chain has a weak link.

Even though it's the world's largest processor,

it relies on foreign countries for much of its raw lithium,

including US allies.

Chinese companies also mine some lithium domestically,

and they're fighting for control.

Global lithium prices were about 300% higher in August

than they were at the beginning of 2021.

- In China, as is the case all over the world,

people discovered that lithium

is becoming a very important commodity.

Demand for the commodity also shot up.

So when the local government auctioned rights

to explore a mine, the bidding war just started,

and they submitted thousands of bids and the prices went up.

- [Narrator] One recent auction for exploration rights

at a lithium site in Sichuan received over 11,000 bids.

And the auction for the Jiada Lithium Mine

closed at the equivalent of $580 million,

1300 times higher than its starting price.

Lithium is an abundant mineral globally,

but it's often difficult and expensive to extract.

- At the moment, China actually doesn't mine

a lot of lithium.

Most of the mining of lithium takes place

in Latin America and Australia,

which actually exposes Chinese companies

to a supply chain vulnerability of getting the raw material.

Chinese companies are really worried

that a lot of the countries that are friendly

with the United States might cut off

Chinese companies' abilities

to invest more in these countries.

- [Narrator] Australia, the world's largest

raw lithium supplier, blocked the sale of a mine

to a company with a director holding Chinese citizenship.

And Canada has similarly ordered three Chinese companies

to sell their stakes in Canadian mines.

Instead, China is turning to countries in Africa

and Latin America for riskier raw lithium investments.

In the past two years, Chinese companies have spent

$4.5 billion on stakes in nearly 20 African

and Latin American lithium mines.

- The strategy to go to developing countries

is not without risks because a lot of these countries

have somewhat unstable political regimes.

They're quite underdeveloped

when it comes to infrastructure.

And if you wanna mine and do things,

you need roads, you need power, you need facilities.

- [Narrator] Many nations are also tightening control

over their mines.

In December, Zimbabwe banned the export of raw lithium,

instead forcing companies to process it within the country.

- And then there's also something

called resource nationalism.

So a lot of these developing countries say to themselves,

well, you know, we have these resources

and selling it as a sort of raw product

actually gets us less money

than if we have a valued added industry with that.

So if we, for example, process lithium

and maybe even one day produce our own batteries

because that's actually where you make a lot of the money

and it's also in a bit an opportunity

to upscale your labor force.

But that's obviously easier said than done.

- [Narrator] And in Latin America,

Mexico and Chile are also tightening control.

While Chile, Bolivia, and Argentina are discussing

creating a lithium cartel.

- A lot of these developing countries

come with their own risks.

Chinese companies are also concerned

that US allied countries could limit

their access to lithium.

- [Narrator] Some experts disagree that China is vulnerable

to US allies restricting their raw lithium

and say that China's investments in Latin America

and Africa are paving the path

for a stronger supply chain in the future.

- For a lot of these countries that have lithium,

China is actually a very good customer

because it has a steady demand for lithium.

It doesn't just buy lithium for lithium's sake, right?

It buys it because it needs it for product.

So you know that they will be there tomorrow

and the day after tomorrow,

and that gives them a lot of stability

in terms of the money, the revenue that they can get.

You may not get the highest price,

but you get a very steady price,

and that can be very reassuring.

- [Narrator] Lithium mining died out in the US

in the 20th century because companies found cheaper methods

to harvest lithium in South American salt lakes.

- And because there was no mining,

refining also left the US.

- [Narrator] Now the US wants to secure its own supply chain

to reduce its reliance on China,

but it has a long way to go.

Propelled by the Inflation Reduction Act

and a growing demand for green energy sources,

the US is also increasing its efforts

to tap into its own lithium deposits

and construct domestic lithium refineries.

Tax credits and green energy subsidies

from the Inflation Reduction Act

discount the cost of producing lithium by 10%,

enticing companies to make American lithium investments.

Exxon Mobil plans on entering the lithium market

by building one of the world's largest

lithium processing facilities in Arkansas.

When completed, analysts predict it could produce

75,000 to a 100,000 metric tons of lithium a year.

That would add up to 15% of all finished

lithium product globally.

But there's a catch.

Many of these lithium extraction plants

haven't been built yet.

One upcoming mine owned by Lithium Americas

contains one of the largest known lithium sources in the US.

Lithium Americas told the Wall Street Journal

that besides one other small operational mine,

it has the only project in North America

that's permitted and in construction.

Its mine, Thacker Pass, has been in the works for 16 years

and still has another estimated three years

of construction to go.

- It's an essential metal for a lot of the technologies

that we need for the decarbonization of the world.

Every country wants to get hold of lithium

so that they can build those technologies.