Chinese miners, EV makers urge Beijing to support overseas lithium investments

China's battery supply chain sector urged the government during annual parliamentary meetings in Beijing to support domestic and overseas lithium investments as geopolitical risks have made it harder to secure lithium supplies.

Chinese miners and battery plants have been racing to snap up lithium resources at home and abroad while miners struggle to keep up with growing demand from electric vehicle manufacturers. But companies are facing mounting headwinds as more countries restrict Chinese investment in critical minerals within their borders and entities.

"Upstream suppliers in the new energy supply chain are often falling short of the expansion of battery-makers," Li Liangbin, chairman of Ganfeng Lithium Group Co. Ltd., said in an interview with state-owned Shanghai Securities News on March 6.

Most resources are in less-developed countries, so miners must develop the infrastructure, talents and technology, Li said. A mature lithium project typically takes two years to come online, whereas expanding and building battery production lines only takes a year, Li said.

Companies are urging Beijing to boost cooperation with governments in resource-rich nations while providing more support on domestic exploration. But the central government has few options to help these companies, in part because they are highly reliant on overseas lithium resources and therefore lack bargaining power, Zhang Jinhui, an analyst at consultancy ICCSINO, told S&P Global Commodity Insights.

Growing geopolitical risks

Countries' efforts to move their EV supply chains away from China are creating more setbacks for Chinese companies.

Canada ordered three Chinese companies to divest minority stakes in the country's lithium miners in November 2022, shortly after Chinese lithium miner Sichuan Yahua Industrial Group Co. Ltd. scrapped investment plans in Canada's Ultra Lithium Inc. Australia blocked Yuxiao Fund from increasing its investment in rare earth miner Northern Minerals Ltd. on the grounds of national interest.

China's lithium ore imports pose a stark concentration risk as they mainly come from a single country, Australia, which accounts for more than 60% of global lithium ore supplies, Yin Tongyue, chairman of Chery Automobile Co. Ltd., wrote in a March 4 statement.

"Chinese companies in the lithium battery supply chain generally [import] mineral resources back to process, sell and use in China. This business model brings big worries," Yin said.

Help with overseas investments

Large companies are gearing up for longer construction timelines and higher costs as they try to shift away from the nations imposing new investment restrictions to less-developed resource-rich countries.

Ganfeng, China's largest lithium refiner, has spent more than $1.8 billion since 2021 to boost self-sufficiency for resources, including a $962 million deal to acquire Lithea Inc., which owns salt flats in Argentina.

Contemporary Amperex Technology Co. Ltd., China's largest battery-maker, led a consortium to help Bolivia unlock 25,000 tonnes per year of battery-grade lithium carbonate with a more than $1 billion investment in infrastructure.

Ganfeng's Li urged Beijing to provide policy support for Chinese companies looking to invest in overseas mining resources, including establishing cooperation mechanisms for trade, investment and technology with resource-rich countries.

Chery's Yin called on Beijing to list lithium, nickel and cobalt as national strategic mineral resources and to promote related development and investment in resource-rich countries, especially those that are taking part in China's Belt and Road Initiative.

Yin recommends Beijing guide companies in the EV supply chain, particularly state-owned enterprises, to actively participate in industrial chain cooperation and development of resource-rich countries. The companies, for their part, should make contributions to local economic development and social welfare, and work to improve China's image, Yin said.

Efforts to shore up domestic supplies

China refines about 60% of the world's lithium chemicals, according to the International Energy Agency, but it has limited domestic supplies of key battery materials. According to S&P Global Market Intelligence data, China only accounted for about 15% of global lithium raw material in 2022 — far from what it needs to supply its domestic EV demand.

Local governments have been encouraging lithium mining, but supplies are limited due to low lithium reserve grades, ICCSINO's Zhang said.

Over 80% of China's lithium reserves are salt-lake brines in Qinghai and Tibet, where the ecology, lack of transportation and lower lithium content make mining more difficult and more expensive, Yin said in a separate interview with Shanghai Securities News on March 6.

Domestic lithium production growth is also being limited by a lack of new exploration projects, Ganfeng's Li said.

Zhu Huarong, chairman of Chongqing Changan Automobile Co. Ltd., said in an interview with state-owned China Securities Journal on March 6 that he urged the government to launch policies to encourage tech-savvy and well-funded companies to accelerate discovery and development of domestic lithium resources.

Li called for integrating government and private sector resources to explore lithium resources within China, developing lithium battery recycling technology and improving relevant laws and regulations.

Zhu, Li and Yin are members of National People's Congress, China's top legislative body. The annual session of the National People's Congress wrapped up March 13.

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