[Dominating Chinese Battery Industry] 113 Trillion Won Spent on Global Lithium and Nickel Mine Acquisitions Over 5 Years... "Still Hungry"

Over 60% of Battery's 4 Major Minerals Refined in China
China's Share Low in Mineral Origin
Battery Cost Competitiveness, Result of Industrial Strategy Starting from Raw Materials

Editor's NoteThe growth of the Chinese battery market is fierce. Based on massive domestic subsidies, China has achieved economies of scale and continuous technological innovation in the battery sector. As a result, it has secured a market share well over half of the global battery market. Even South Korea, which is fiercely competing with China in batteries, is absolutely dependent on China in the minerals and materials sectors. The dependence on China in the materials sector, from mineral raw materials such as lithium and nickel, which are basic raw materials, to precursors (cathode material raw materials), exceeds 80%. We took a closer look at the competitiveness and market situation of the rapidly growing Chinese battery market and the response strategies of Korean companies.

#China’s Ningde Times New Energy Technology (CATL) spent $1 billion (about 1.323 trillion KRW) last January to secure lithium from Bolivia. Bolivia is the world’s largest lithium reserve country. The Bolivian state lithium company announced that it will produce 25,000 tons of lithium carbonate with 99.5% purity annually. Lithium carbonate is the raw material for LFP (Lithium Iron Phosphate) batteries, which dominate the global electric vehicle supply chain.

#China’s largest lithium producer, Tianqi Lithium, has been steadily acquiring stakes in lithium companies in Chile and Australia since 2018. It secured a 24% stake in SQM, a Chilean lithium hydroxide producer vertically integrated from mining to battery production. In 2014, it acquired management rights of Talison Lithium Mine in Australia, which holds the world’s largest lithium mine. Tianqi Lithium continues to knock on the doors of South American mining companies.

A worker at the SQM lithium mine in Chile is showing lithium with 9% purity from a sample pool.
[Photo by AFP Yonhap News]

There are 22 companies in China that produce and refine lithium hydroxide. Lithium hydroxide is a key raw material for high-performance ternary batteries. These companies have been building supply chains by acquiring lithium mines in Australia, Chile, Africa, and Argentina for over a decade. Chinese raw material market research firm BAIINFO (百川盈孚) reported that the lithium hydroxide mined worldwide by these companies amounted to 334,000 tons in 2021. This is a 13-fold increase from 25,000 tons in 2016 over five years.

The share of China in the origin of the four major battery minerals is surprisingly small. The main production sites for lithium, cobalt, nickel, and manganese are Australia (lithium 52%), Congo (cobalt 73%), Indonesia (nickel 36%), and South Africa (manganese 39%), respectively.

However, China tightly controls the global mineral supply chain. This is because more than half of the refining processes for the four major battery minerals are conducted in China. The shares are 68% for lithium, 84% for cobalt, 76% for nickel, and 90% for manganese. The fact that the yuan is the standard currency for international lithium transactions clearly shows China’s dominant position in this market.

In the case of lithium, China possesses large salt lakes but struggles to mass-produce high-purity, high-quality lithium. Instead, it imports lithium ore from countries like Australia and refines and processes it domestically, growing into the top predator in the supply chain. The lithium refining and processing business emits a large amount of carbon dioxide during processing, causing environmental pollution issues. For this reason, advanced countries have avoided this business. China, which is less sensitive to environmental issues than advanced countries, has monopolized this market.

China’s energy ambition to dominate raw material supply chains has been ongoing for about 15 years. The Chinese government first implemented the “National Mineral Resources Plan” in 2008 and revised it every five years to manage key minerals. Since President Xi Jinping initiated the “Belt and Road Initiative,” overseas resource equity investments have accelerated. Chinese companies began sweeping lithium and nickel mines in Africa, South America, and other developing regions. According to the China Ministry of Commerce’s Foreign Investment Statistical Yearbook, China invested $86.4 billion (about 113 trillion KRW) in overseas mines and acquired mineral companies through mergers and acquisitions from 2013 to 2018.

Lithium ore [Image source=Reuters Yonhap News]

Having already swallowed the core battery mineral market, China is still eager to secure supply chains. China, which ranks at the top in electric vehicle and battery market shares, is tightening the global supply chain by weaponizing resources. If a specific country secures too many resources, it can disrupt the battery supply chain market by using price-setting power. This is the same context as CATL, the world’s number one battery manufacturer, recently announcing a “half-price lithium” policy, signaling a “chicken game.” CATL’s low-price offensive was possible because it owned lithium mines. Ultimately, the cost competitiveness of Chinese batteries is the result of China’s industrial strategy that intervened from the raw material stage.

Kim Jeong-hae, head of KOTRA Shanghai Trade Center, said, “China is currently the world’s number one lithium hydroxide exporter, exporting more than 95%, of which 63% is exported to South Korea.” He added, “Building an industrial ecosystem that vertically integrates from raw material procurement to supply chain is the core capability to respond to future supply chain crises.”