Last month, antimony prices soared 40% in a matter of days after China banned exports to the United States of several critical minerals. China enforced the existing limits on antimony, gallium, germanium, critical minerals that have widespread military applications ahead of President-elect Donald Trump taking office. China is the world’s largest producer of antimony, accounting for 48% of global mined output. The country’s output in 2023 clocked in at 40,000 tonnes, nearly double Tajikistan’s 21,000 tonnes while Turkey was the third largest producer with 6,000 tonnes.
“In principle, the export of gallium, germanium, antimony, and superhard materials to the United States shall not be permitted,” Chinese Commerce Ministry said.
And now reports have emerged that Beijing is getting ready to pull off a similar move in the lithium sector. The Chinese commerce ministry has proposed export curbs on technology essential for battery components and critical minerals processing, including lithium and gallium. Beijing is going down this path again in a bid to protect its dominant 70% market share in lithium processing for EV batteries, as well as support its domestic battery manufacturing giants. The proposed restrictions on lithium battery technologies could hinder the overseas expansion plans of major Chinese battery makers, including CATL.
“These proposed measures would be a move to maintain this high market share and to secure lithium chemical production for China’s domestic battery supply chains,” Adam Webb, head of battery raw materials at consultancy Benchmark Mineral Intelligence, told Reuters. “Depending on the level of export restrictions imposed, this could pose challenges for Western lithium producers hoping to use Chinese technology to produce lithium chemicals,” he added.
China’s EV sector is booming: the country’s 10 millionth electric vehicle rolled off the production line in November, beating the 2023 production seven weeks before the year’s end amid growing worries of overcapacity. Chinese EV makers delivered 9.75 million units to mainland buyers between January and October, good for a robust 34% Y/Y increase. Helped by government subsidies of up to $2,800 apiece for trading in older cars for EVs as well as more fuel-efficient cars, China Passenger Car Association (CPCA) secretary-general Cui Dongshu has predicted that China’s EV revolution will continue undeterred by a faltering economy. Sales of new energy vehicles (NEVs) in China overtook conventional auto sales for the first time ever in July, and now account for more than half of all units sold.
“As EVs outsell conventional petrol cars, more existing production facilities and workers will become redundant. Demand for petrol cars will weaken in the coming years,” Phate Zhang, founder of Shanghai-based EV data provider CnEVPost, told South China Morning Post
BYD Company Ltd (OTCBB: BYDDY) remains China’s biggest EV seller, with sales topping the 500,000 benchmark for the first time in October. BYD reported Q3 2024 revenue of $28.2 billion, good for a 24% Y/Y growth while net profit increased 11.5% Y/Y to $1.63 billion. In comparison, Tesla Inc. (NASDAQ:TSLA) reported third quarter revenue of $25.2B, good for a 8% Y/Y increase while net income rose to about $2.17 billion, or 62 cents a share, from $1.85 billion, or 53 cents a share, a year ago.
China Dominating Critical Minerals
The past couple of years has seen China tighten the leash on the critical minerals sector. The historic Inflation Reduction Act (IRA) of 2022 took bold steps towards promoting U.S. production of critical minerals, with a dual-pronged goal of supporting a rapid energy transition and lessening U.S. reliance on China and Russia, two countries the U.S. the Department of Energy has tagged “foreign entity of concern” (FEOC). According to the United States Geological Survey, China accounts for 70% of global rare earth mining and 90% of refined output. Unfortunately, decoupling from China’s sprawling renewable energy sector is proving to be easier said than done with the country tightening its grip on the industry. The Middle Kingdom is using its overwhelming dominance in rare earth elements (REE’s) and critical clean energy minerals to kick out Western competitors and protect its market share.
Chinese producers have been flooding the markets with REE and battery metals like lithium, leading to big price crashes and making it untenable for competitors to continue operations. Since last year, lithium is down by more than 80 percent, while nickel and cobalt have both tumbled over 40 percent.
In response, miners from Australia to Canada have been forced to cut production, pull back on investment plans and initiate layoffs. Even larger producers such as Las Vegas, Nevada-based rare earths miner MP Materials (NYSE:MP) and its Australian peer Lynas Rare Earths (OTCPK:LYSCF) (OTCPK:LYSDY) are barely hanging on, and their shares have crashed.
And, the Chinese government is doing everything in its power to thwart attempts by Western governments at independence. Since 2006, Beijing has controlled its supply of rare earths through the quota system.
“China is driven to maintain its market dominance. This is now a race,” Don Swartz, CEO of American Rare Earths (ARR.AX), told Reuters.
‘‘The global nickel situation is dire and it is, in my view, an extreme threat to national/international security as well as the environment. I’m saddened to see the closure of many of WA’s nickel assets (First Quantum Minerals, Wyloo, BHP, Panoramic Resources Limited) and BHP’s review of their NiWest operations. This is an extremely negative development for supply chain security and for the environment – it will only serve to tighten the grip of (dirty) Indonesian nickel on the market and further concentrate critical metal supplies into the hands of FEOC,’’ Ashley Zumwalt-Forbes, deputy director of the DoE’s Batteries and Critical Materials department, lamented on LinkedIn.
The Biden administration has conceded that beating China’s hegemony in critical minerals is an arduous task, “This is not about China. We are perfectly happy to work with them on this and right now we purchase many of the minerals from Chinese companies. It’s about diversifying. The world needs them to be involved–the broader picture is climate change, and we’re not going to solve the climate crisis without the involvement of the PRC,” Jose Fernandez, the U.S. undersecretary for economic growth and the environment, told a briefing in New York in 2023.
By Alex Kimani for Oilprice.com
