Chinese mining companies are stepping up efforts to increase their access to lithium deposits in a bid to meet the growing global demand for batteries. The likes of Ganfeng, Suzhou TA&A, Sinomine and BYD — a global battery and electric vehicle (EV) manufacturer which overtook Tesla in global EV sales in the first six months of 2022 — have all taken steps to acquire lithium mining rights in South America and Africa.
“In the medium term, [the world] is still going to be reliant on [lithium] supply chains from China,” because of China’s dominance in lithium production and processing, Thomas Chandler, critical metals analyst at SFA Oxford, tells fDi.
However, Chinese miners face challenges as they try to increase production. Susan Zou, senior analyst at Rystad Energy, tells fDi that they will encounter challenges including a lack of resources and conflicts with local communities while attempting to ramp up their mining capacity.
“China is vulnerable as it lacks [lithium] resources at home, and has to rely on supply from other countries,” says Joe Lowry, president of consultancy Global Lithium.
Lithium is a vital element in battery production. In recent years, the significance of lithium-ion batteries has increased dramatically as they underpin the green transition, moving beyond consumer goods to include energy storage and power EVs.
China controlled 65% of the world’s lithium processing and refining capacity in 2021, according to Rystad Energy. However, its access to lithium deposits only accounts for less than 25% of the world’s lithium resources, the company estimates.
“The huge gap between China’s processing capacity and its lithium resources results in the country actively expanding lithium mining both domestically and abroad,” Susan Zou, senior analyst at Rystad Energy, tells fDi.
Chinese miners have announced a flurry of deals in South America and Africa.
On July 11, Ganfeng Lithium, which supplies Tesla, disclosed that it has agreed to acquire Argentina-focused mining group Lithea for no more than $962m, according to a filing to the Shenzhen stock exchange.
The deal gives Ganfeng Lithium rights to two salt lake brines in Argentina — namely Pozuelos lithium salt lake and Pastos Grandes lithium salt lake.
Argentina, part of the ‘lithium triangle’, has the world’s second-largest lithium reserves beneath its salt flats, behind Chile and ahead of Bolivia.
Ganfeng Lithium has gradually increased its lithium assets in Argentina. The company previously started construction on a $600m lithium chloride production plant in Salta, according to an Argentinian government report published on June 3. Ganfeng said in a statement that it is aiming to reach annual production output of 20,000 tonnes of raw lithium.
Ganfeng also owns a full stake of the Mariana project and 47% of the Cauchari-Olaroz project in Argentina. The Mariana project is expected to start production in 2025, and the company expects to start first operation of the latter project this year.
Outside of South America, the company owns a 50% stake in the Goulamina spodumene (lithium aluminium inosilicate) project in Mali; a 55% stake in the Avalonia spodumene project in Ireland; and has stakes in a lithium-containing clay project in Mexico.
Ms Zou notes that six out of eight of the new lithium projects announced across Africa in the past two years are partially or fully owned by Chinese companies.
Among others, China’s Sinomine Resource group acquired Zimbabwe’s Bikita Minerals, the only mine in Africa producing lithium as of 2021, in January. The company plans to ramp up production to five million tonnes of lithium per year by end of June 2023, according a statement from the state-owned engineering company PowerChina on July 14.
The price-reporting agency Benchmark Mineral Intelligence said in June that a person close to BYD confirmed that the company was seeking African lithium deposits, but BYD did not answer a request for comments from fDi.
Chinese lithium processors are also actively signing offtake agreements with African lithium miners to secure lithium minerals, adds Ms Zou.
Benchmark Mineral Intelligence estimates that Africa’s lithium supply could increase nearly sixfold between 2025 and 2022.
Togo-based Premier African Minerals announced on June 23 that it will start shipping spodumene concentrate from its Zulu lithium mine in Zimbabwe to China by March 2023, after signing an offtake deal with Suzhou TA&A.
Challenges still remain
Experts expect that it will not be easy for Chinese companies to ramp up lithium production capacity as there is a fear surrounding a serious supply shortage in the years ahead.
Ms Zou estimates that the global lithium mining capacity is about 25% short of the processing capacity of lithium carbonate and hydroxide in 2025.
“There is plenty of capacity for both lithium processing and cathode manufacturing; however, we don’t have enough lithium minerals to feed the midstream sectors,” she adds.
Specifically for China, Mr Lowry says the country needs to secure feedstock to ensure its competitiveness. The country has low-quality resources to supply a meaningful volume of local lithium to match the lithium-ion batteries demand.
Henk de Hoop, CEO at SFA Oxford, tells fDi that it will take time to ramp up lithium production capacity, considering the time needed to get new mines up and running, which includes lengthy geological and environmental studies.
Indeed, lithium mines require between three and seven years to build and be operational, according to S&P global’s analysis in 2019.
Ms Zou also notes that local support is one of the challenges Chinese companies will face.
BYD experienced this first-hand in Chile. The company was awarded a $61m contract in January 2022 to extract up to 80,000 tonnes of lithium. However, two days after the company won the contract, a Chilean appeal court ordered the suspension of the deal as the regional governor of Atacama and local indigenous communities filed protection appeals against the minister of mining and energy, Juan Carlos Jobet.
The appeal alleged the violation of constitutional equality before the law — the right to live in an environment free of contamination.
This article first appeared in the August/September 2022 print edition of fDi Intelligence. View a digital edition of the magazine here.