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.