China’s control over the global lithium supply chain presents elevated risks to downstream U.S. companies as Chinese companies continue to expand their footprints in overseas lithium mines.
“China currently dominates the global lithium battery supply chain. Upwards of 70% of the total global Li-ion battery manufacturing capacity is controlled by China. ... Should China decide to throttle supply or dramatically raise prices, this would hurt the U.S. transportation and logistics sectors, which are quickly adopting lithium battery-powered electric vehicles,” the report states.
According to the Chinese digital newspaper The Paper, BYD Co. Ltd. (01211.HK), a Chinese conglomerate and electric vehicle manufacturer, is currently in talks to buy six lithium mines in Africa containing more than 27 million tons of lithium oxide at 2.5 percent grade—enough to supply BYD with 10 years of lithium oxide.
EV manufacturers have come under pressure due to the soaring lithium price for EV batteries amid the surging demand for electric vehicles. As a result, many companies also have stepped into the global race to acquire lithium mines.
Chinese Control in Critical Lithium ResourcesThe lithium industry has a high degree of market concentration. In 2020, five companies accounted for nearly half of the world’s lithium production capacity, producing approximately 75 percent of the worldwide supply, according to a report released by China Merchants Bank Research Institute on March 4.
Two of the five companies—Jiangxi Ganfeng Lithium Co. Ltd. (01772.HK) and Tianqi Lithium Co. Ltd. (02466.SZ)—are from China. Both companies have taken up significant shares in global lithium resources, allowing them to control the lithium supply chain.
Among them, the Mount Marion Project in Australia is the largest source of Ganfeng’s lithium supply. Ganfeng secures stable raw materials supplies by signing long-term procurement agreements with upstream lithium providers after investing in them.
And in 2018, Tianqi Lithium purchased 23.77 percent shares in SQM, a world-leading brine-based lithium producer. The company has since become the second-largest shareholder of SQM.