Let me explain the new global war on lithium
This increasingly strong tension between supply and demand on the world lithium market is the direct consequence of the geostrategic and political challenges led by the powers. The article by Giuseppe Gagliano
According to the European Commission's April 9, 2019 report on the implementation of the strategic action plan on batteries, the production of cobalt, graphite and lithium will be five times higher in 2050 than in 2018 to meet the need for electric batteries. Demand for lithium will explode with the rise of the electric car. For the International Energy Agency, the needs will be multiplied by 42 to ensure the transition to carbon neutrality. Furthermore, the sharp increase in electric car sales (nearly 4 million units in China, in 2022) has strongly awakened the lithium market in recent months with a dramatic increase in the average price of lithium carbonate in the world between 2010 and 2022. 2021 .
THE COMPETITION FOR LITHIUM BETWEEN CHINA, EUROPE AND THE USA
This increasingly strong tension between supply and demand on the world lithium market is the direct consequence of the geostrategic and political challenges conducted by the powers (in Asia, Europe and America) for the control of low-carbon energies in the ambit of the energy transition.
In fact, China in its ten-year plan "Made in China 2025", aims to become by 2049 (the centenary year of the foundation of the People's Republic of China), the first world power in all the technologies of tomorrow (batteries, electric vehicles, intelligence artificial, etc.).
As for Europe, batteries will be one of the great vectors of the energy transition, given the important role they play in stabilizing the electricity grid and developing clean mobility. Thus, Europe foresees by 2035 a total convergence towards electric vehicles with a massive production of lithium-based batteries.
The United States, on the other hand, is targeting a 50 percent electric vehicle fleet by 2030 to put America in a position to lead the future of the electric car, overtake China, and tackle the climate crisis. Behind all these announcements is a ruthless economic war for the control of strategic minerals including lithium. In addition, this positioning clash on the lithium-based green energy market takes place between automakers including the American Tesla and the Chinese BYD.
LITHIUM AND THE ELECTRIC CAR
This market is structured around world reserves, supply chains, ore refining, and lithium battery manufacturing, especially for automakers. According to studies, the rechargeable battery represents 40% of the production cost of an electric vehicle (EV). Today, there are more than 4 million electric vehicles on the road in the world. They should be between 50 and 200 million in 2028 and reach 900 million in 2040, hence the strategic nature of lithium for the rechargeable battery industry.
Lithium is a very light metallic element, twice less dense than water, and which has a very strong electronegativity. Its uses are very varied, dominated since 2015 by the rechargeable battery sector. The lithium market stakes in 2018 focus on extremely strong growth prospects. This market share is constantly growing and the impact is important on the demand for lithium and therefore on the prices. Average growth in lithium demand is expected to be around 18% annually and the battery sector's share is expected to be between 60% and 86% of the total around 2025.
WHERE THE DEPOSITS ARE LOCATED
At the level of world lithium reserves, data at the end of 2020 published in February 2021 by the Statista website report 18 million tons of lithium held by five (05) countries, namely: Chile, Australia, Argentina, China and the United States . The first world reserve belongs to Chile with 9.2 million tons, or more than 50% of the share of the 05 countries mentioned. Australia and Argentina hold 4.7 million and 1.9 million tonnes respectively versus 1.5 million tonnes for China and 0.75 million for the United States.
Other studies indicate that the lithium triangle in ABC (Argentina, Bolivia and Chile) hosts between 60 and 70% of the world's reserves. The future of lithium is thus played out in central South America and these deposits form an indispensable geopolitical game between the major industrial powers to maintain access to the resource .
At European level, in terms of deposits, Spain, Finland, France, Ukraine and Portugal are the most represented and also the most active in litiniferous exploration.
THE DOMINATION OF CHINA
In supply chains and refining, China controls 65% of the world's production of refined lithium with its two industry giants, Jiangxi Ganfeng and Tianqi Lithium climbing into first and third place in the market. Furthermore, 80% of the metals required for the production of electric vehicle batteries are processed in China, which gives a huge competitive advantage to the economy of the Middle Empire which owns half of the world's fleet of electric vehicles and exports much of it. of its production abroad, mainly in Europe. This dominant position of China in this energy market of the future is certainly not appreciated by the West, in particular by the United States and the European Union and hence the ongoing geostrategic rivalries between these economic powers.
Over the past twenty years, China has been aware of the challenges of rare earths and strategic minerals. Its rise in this sector is perceived as a threat by Western economies when China had used all economic and geostrategic maneuvers including dumping to achieve its goals. China thus organized the exit from the market of Molycorp (the American company, the only producer and processor of rare earth elements in North America) through price dumping and therefore bought (through Shenghe) part of the rights to the mine's production. Also in 1994, Rhône-Poulenc, one of the two world leaders in rare earth processing in the 1980s, was forced to hand over rare earth refining to China.
In less than twenty years, China has acquired strategic metal mines all over the planet and has developed cutting-edge industries to export high-tech products. Thus we observe a policy of colossal investments in mines all over the planet where between 2005 and 2021 its foreign direct investment (FDI) in the mining sector reached 125 billion dollars, almost the equivalent of the present value of the plan Marshall from the United States to Europe after World War II.
Thus, in the lithium market, the Chinese companies Ganfeng and Tianqi are the world leaders who together accumulate about 60% of the world's lithium production. Chinese companies, across all categories, have secured millions of tons of lithium supply over several years by acquiring interests in flagship projects. Furthermore, China initially welcomed many foreign companies and then, later, absorbed the technologies of the latter to multiply its domestic production gradually upsetting international competition thanks to its economic and environmental dumping. Furthermore, this dominance also feeds into the environmental costs that China has agreed to bear. Indeed, with environmental standards less stringent than those of Western countries, China has taken on the green cost, which has enabled it to secure an indispensable position in lithium refining to meet the colossal needs of the electric vehicle industry.
In short, China's balance of power vis-à-vis the West in this area stems from its ability to master raw material supply sources by controlling all value chains, including refining at the expense of standards and environmental impact.
THE US ANSWER
How does America intend to react to this situation? Among the main lines of the Biden administration in matters of sovereignty and technological competition is the transition to green energy. This transition will be a major source of economic growth and job creation for the United States in the coming years. In the longer term, it will also ensure the independence and energy security of the United States. Thus, on August 05, 2021, President Biden signs the decree in the White House declaring the goal that half of the vehicles sold in the United States by 2030 will be electric .
To do so, the US Department of Energy has opened multi-billion dollar funding to establish national lithium battery supply chains, crucial to moving the country into clean energy. The US government's goal is to ensure that more than half of the vehicles sold in its territory are electric and to guarantee the country's independence by fighting against Chinese dominance in the sector. This measure taken by President Biden is also part of a larger campaign to distance the country from Russian energy. To this end, Albemarle, a leader in the lithium and lithium derivatives industry in the United States, plans to increase its global lithium production capacity five-fold to reach 500,000 tons per year by 2030. In addition, among the strategies Americans in lithium are the reconquest of sources of supply or the discovery of reserves of lithium and other metals for the increase of their industrial capacity in the production of rechargeable batteries.
Now the AUKUS alliance, outside the stakes in the Indo Pacific, could be a strategy for the United States to strengthen ties with Australia, one of the countries with an important lithium reserve and where Chinese investments in lithium reached 27 billion US dollars in the period 2005-2021. Furthermore, the United States prevailed in Morocco against the Europeans (Spain and Germany above all) on the discovery of Mount Tropic. Indeed, the Mont Topic is full of cobalt and above all of tellure which is a very rare mineral used in the manufacture of some weapons but also of some electric car batteries. The tellure of Mount Tropic, according to British studies, would be 50,000 times larger than all deposits discovered to date and the cobalt reserves are equivalent to the reserves of the Congo.
If all these positions are confirmed, the United States could significantly change the balance of power on the rechargeable battery market and consequently the global future of the energy transition. And what role does Europe play in all of this? Lithium has been identified as a critical element by the European Commission. The European Commission's 2019 Carbon Neutrality Vision 2050 report aims to create a strategic value chain of batteries in Europe with a target of 100% electric vehicles by 2035. For the Commission, the potential of the European market for rechargeable batteries is huge and could amount to €250 billion annually from 2025 and a legislative and governance framework has been adopted to accelerate the transition to a green economy .
THE PLAN OF THE EUROPEAN UNION
Currently, Europe's share of global battery cell production is 3% while Asia's is 85% and if nothing is done to support the creation of a sustainable battery manufacturing sector, Europe risks losing hopelessly ground against its competitors in the global battery market and become dependent on imported battery cells and raw materials used in the supply chain.
To drive this long-term vision, the Union created the "European Battery Alliance (AEB)" in 2017 to support the upgrading of innovative solutions and production capacity in Europe. Also in May 2018, the Commission adopted the action plan entitled Europe on the move. This plan made it possible to build a series of measures to support national, regional and industrial efforts aimed at creating a battery value chain in Europe and covering the extraction, supply and processing of raw materials, battery materials, cell manufacturing, battery systems, as well as reuse and recycling.
All these measures thus demonstrate the European dynamism in the lithium battery market and considerable investments will be needed for this purpose. According to forecasts, 20 to 30 giant factories will have to be built in Europe just for the production of battery cells and their ecosystem will have to be significantly strengthened. Rapid mobilization of private investment is therefore recommended as a key factor for the success of these ambitions given the scale and pace of investment needed.
Europe is therefore not on the sidelines of this economic war between powers for the energy transition race and this pressure on Europe becomes more palpable with the ongoing war between Russia and Ukraine. Conflict in which the question of the European Union's energy dependence is at the center of geostrategic debates and clashes. Thus, outside the "responsible" exploitation of lithium resources on European soil, Europe could position itself significantly in the currently still very virgin recycling segment by creating European champions in lithium battery recycling with a view to producing more than 900 million electric vehicles worldwide by 2040.
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/mondo/litio-potenze-mondo/ on Mon, 24 Apr 2023 08:09:00 +0000.