Current situation of lithium resources in China
Although China occupies a dominant position in the global lithium battery industry chain, it faces serious external dependence in the supply of upstream lithium resources. Despite the continuous increase in the development of domestic lithium resources, China's own lithium reserves account for only about 8% of the world's total reserves, which is far from meeting the needs of the country's booming new energy industry. This structural contradiction exposes China's lithium battery industry to the potential risk of "resource bottleneck", especially in the context of the current global geopolitical tensions and the rise of resource nationalism.
Resource endowment and demand gap
The serious imbalance between resource endowment and demand gap is the fundamental reason for China's external dependence on lithium resources. According to industry data, China's lithium production will be 194,000 tons in 2022, while total demand is expected to reach 1.4 million tons by 2025. Even if China plans to increase domestic lithium production to 705,000 tons by 2025, there is still a supply gap of nearly 50% that needs to be filled by imports. Domestic lithium resource development faces many limitations, including poor resource endowment (mostly low-grade lithium mica mines), stricter environmental protection constraints, and insufficient new exploration projects. Li Liangbin, deputy to the National People's Congress and chairman of Jiangxi Ganfeng Lithium Group, once pointed out: "At present, there is a lack of stable output in domestic lithium resource geological surveys, that is, there are few new projects, which has become one of the important reasons for limiting the increase in domestic lithium production capacity."
Accelerate the layout of overseas lithium mine assets
In order to ensure the security of resource supply, Chinese companies have accelerated the layout of overseas lithium mine assets in recent years. According to statistics, in the past two years, Chinese companies have spent US$4.5 billion to acquire equity in nearly 20 lithium mines, mainly in Latin America and Africa. These investments include countries with high security risks such as Mali and Nigeria, as well as regions with strong resource nationalism such as Zimbabwe, Mexico and Chile. Industry estimates show that if these overseas investment strategies are successful, China is expected to control 1/34 of the world's required lithium mine production capacity by 2025. Chinese companies' lithium mine investment in Zimbabwe is particularly typical. Although the local mine production costs are as high as US$600 to US$1,000 per ton and the profits are meager, they still maintain operations for strategic reasons.
Overseas expansion strategy
However, this overseas expansion strategy also faces multiple risks. On the one hand, Western countries are increasingly scrutinizing investments in key minerals, and Canada and Australia have blocked a number of Chinese lithium mine investments; on the other hand, political instability, policy reversals, and community resistance in target countries have also increased project uncertainty. China's cobalt mine investment in the Democratic Republic of the Congo has been criticized internationally for labor rights and environmental issues. In addition, the financial risks brought about by commodity price fluctuations cannot be ignored. Historical experience shows that in price decline cycles, large-scale investments made by Chinese companies to lock in supply often lead to asset write-offs.
Lithium resource import concentration
China's high lithium resource import concentration has also exacerbated the vulnerability of the supply chain. At present, China's lithium resource imports mainly rely on a few countries such as Australia and Chile. Once these major suppliers experience policy changes or geopolitical crises, it will directly affect the stable operation of the domestic lithium battery industry. During the lithium price surge in 2022, Chinese companies had a deep understanding of the dilemma of resources being controlled by people. At that time, the price of battery-grade lithium carbonate soared from 42,000 yuan/ton in 2020 to 567,500 yuan/ton, severely squeezing the profit margins of mid- and downstream companies.
Diversified supply strategy
To meet these challenges, China is adopting a diversified supply strategy, including accelerating domestic resource development, expanding overseas investment layout, and strengthening battery recycling. China plans to form a diversified supply pattern of lithium ore resources, lithium extraction from salt lakes, recycling of waste lithium batteries, and lithium clay mineral resources by 2025. Among them, the recycling of waste lithium batteries is expected to increase from 5,000 tons/year in 2022 to 50,000 tons/year in 2025; the development of lithium clay mineral resources is also expected to form a lithium carbonate equivalent production capacity of 100,000 tons/year. However, these alternatives are unlikely to fundamentally change China's external dependence on lithium resources in the short term, and ensuring the security of key mineral supply chains will still be a long-term strategic issue facing China's lithium battery industry.
