Has China cornered the Lithium market at home and abroad & therefore should KMI clients invest in Lithium?
China holds a significant and influential position in the global lithium supply chain, particularly in refining and battery manufacturing, but does not have a complete “stranglehold.” Here’s a breakdown of its role and the evolving landscap
1. Lithium Mining**
Global Leaders**: Australia (largest producer), Chile, China, and Argentina dominate lithium extraction. China ranks 3rd–4th in raw lithium production.
Foreign Investments**: Chinese firms (e.g., Tianqi Lithium, Ganfeng) have acquired stakes in lithium mines abroad (e.g., Australia, South America, Africa), extending influence over raw materials.
2. Lithium Processing**
Dominance in Refining**: China controls **~60%** of global lithium refining capacity, converting raw lithium into battery-grade chemicals (e.g., lithium carbonate, hydroxide). This midstream control is critical, as processing requires specialized technology and infrastructure.
Cost Advantage**: Lower environmental and labor costs enable China to refine lithium more cheaply than Western competitors.
3. Battery Manufacturing**
– **Gigafactories**: China houses **~70%** of global lithium-ion battery production capacity. Firms like CATL and BYD lead the market, supplying major EV companies (e.g., Tesla, BMW).
– **Supply Chain Integration**: China dominates anode/cathode production and holds significant shares in other battery components (e.g., electrolytes, separators).
4. Geopolitical Responses**
– **U.S. and EU Initiatives**: The U.S. Inflation Reduction Act (IRA) and EU Critical Raw Materials Act aim to build domestic refining and battery manufacturing capacity, reducing reliance on China.
– **Alliances**: Partnerships like the Minerals Security Partnership (U.S., EU, Australia, etc.) seek to diversify supply chains.
5. Challenges to China’s Position**
– **Resource Nationalism**: Countries like Chile and Indonesia are restricting raw material exports to capture more value domestically.
– **Recycling Growth**: Emerging recycling industries in the West could disrupt China’s dominance in the long term.
Conclusion**
China’s dominance lies in midstream (processing) and downstream (battery production) sectors, not raw lithium extraction. While it holds substantial leverage, global efforts to diversify supply chains and develop alternative capacities are reducing its relative control. Thus, China has **strong influence but not a monopoly**—a position that may weaken as other regions invest in self-sufficiency.
