Lithium industry in China: An overview. - Mining - China (2024)

Lithium is one of the fastest-growing high-tech metals and playsa vital role in emerging industries. Since 2020, flourishing salesof new electric vehicles (BEV, PHEV) and government policystimulations have led to an unprecedented demand shock in theglobal market.

In this article, we look at the lithium industry chain, thedistribution of lithium sources both globally and in China, theapplication of lithium sources demands as well as the status quo ofthe sustainability of lithium mining exploration.

Lithium industry chain

Lithium is a powdery white metal used in many rechargeablebatteries that power electric vehicles (EVs) and that storeelectricity generated through renewable resources. The lithiumindustry value chain can be divided into upstream, middle streamand downstream. Lithium is generally extracted from one of twosources: brines and hard rock. Hard rocks such as spodumene andlepidolite are common sources of lithium.

However, according to BNP bank, brines are making up 59%¹ of economicl*thium resources today. Mined materials are processed from rawmaterials to capture lithium compounds. The lithium salt isprocessed into lithium carbonate, which is refined into lithiumhydroxide. These lithium precursors, including lithiumhexafluorophosphate, are ingredients in key cell parts: anodes,cathodes, and electrolytes to make battery cells. Then batterycells store electricity for power grids and are integrated intorechargeable battery packs for EVs.

Distribution of lithium sources

Global

The global lithium resources are rich, but the distribution isnot balanced, as nearly 98.43% of lithium mines are concentrated inBolivia, Chile, Australia, Argentina, the United States and China.According to USGS², the currently identified lithiumresources are 89 million tons. (Identified resources are defined as"Resources for which location, grade, quality, and quantityare known or estimated from specific geologic evidence.").Bolivia has the largest lithium reserve worldwide by a largemargin, amounting to 21 million metric tons, nearly one-fifth ofthe global reserves. Although home to some of the world'slargest lithium reserves, Bolivia has been struggling to acceleratelithium industrialisation for many years. Argentina comes insecond, with reserves estimated at 19.3 million metric tons in 2021while Chile has the third-largest lithium reserve of 9.8 millionmetric tons.

To be specific, the world's lithium brine resources aremainly located in the "Lithium Triangle" plateau regionof Chile, Argentina and Bolivia in South America and dry areas inthe western United States and western China, while the world'slithium hard rock resources are mainly located in Australia, China,Zimbabwe, Portugal, Brazil, Canada, Russia, and other countries.Five mineral operations in Australia, two brine operations each inArgentina and Chile, and two brine and one mineral operation inChina accounted for the majority of world lithium production.

China

In recent years, China has mainly relied on imports to meetdomestic requirements for lithium carbonate products although Chinais one of the countries rich in lithium source reserves. This isbecause China's lithium resources are characterised by ascattered distribution and inferior quality³. Accordingto the statistics published by USGS, China has a lithium reserve of5.4 metric tonnes, accounting for an estimated 13% of the totallithium reserve globally.

Lithium brines possess 85% of the total industrial lithiumreserves in China⁴. The salt lakes are mainlydistributed in northwestern China regions such as Tibet, Xinjiang,Qinghai, and Inner Mongolia, and brine types are mainly carbonatetypes and sulphate types. The carbonate lithium resources aremainly concentrated in Zabuye Salt Lake in the west of Tibet andthe Dongtai and Xitai Ji Nai'er Lake in Qinghai.

The sulfate lithium resources are mainly distributed in theChaidamu Basin and the north of Tibet. The quality of Tibet SaltLake in China is higher than that in Qinghai, with the remarkablecharacteristic of the high content of lithium resources and lowMg/Li value of brine⁵. However, due to geographicalconstraints and inadequate infrastructure, Tibet's Salt Lakelithium extraction is not fully developed.

Spodumene is mainly distributed in Sichuan, Xinjiang, and Henan,and lepidolite is mainly distributed in Jiangxi and Hunan,accounting for less than 20% of the lithium reserves.

The application of lithium resource demand in China

Lithium has many uses, the most prominent being in batteries forlaptops, cell phones, and electric and hybrid vehicles. In 2021,batteries were the largest end-usage of lithium worldwide by far.This application accounted for 71 percent of lithium consumption,while use in ceramics and glass for strength and resistance totemperature change made up another 14 percent⁶. Lithiumis also used in heat-resistant greases and lubricants, polymerproduction, casting mould powders and air treatment. Moreover,lithium is even used in certain psychiatric medications and dentalceramics.

Lithium consumption for batteries has increased significantly inthe past few years because rechargeable lithium batteries are usedextensively in the emerging market for portable electronic devicesand are increasingly used in electric vehicles, electric devices,power tools, and grid storage applications.

Lithium-ion batteries offer unique advantages over theiralternative lithium and other elemental chemicals. It offers thehighest energy density in the rechargeable battery market, and itis easy to use, relatively low maintenance and has a long shelflife. Increases in battery demand will continue to be a strongdriver of lithium consumption, as lithium-ion battery technology isused extensively in the production of electric vehicles.

By now, there are six basic lithium battery chemistries, andeach has its own characteristics. The table below lists differenttypes of lithium batteries and compares the advantages anddisadvantages as well as typical applications:

According to the International Energy Agency (IEA) ⁷,global EV sales doubled in 2021 to a new record of 6.6 million andhave kept rising strongly in 2022. To be specific, the increase inEV sales was primarily led by China, which accounted for half ofthe market share. The incrementation in China owing to supportivegovernment policies and public spending on subsidies andincentives, coupled with the presence of market players in thecountry, is expected to drive the demand for lithium-ion batteriesin China in the next decade. According to a report by Grand ViewResearch⁸, lithium-ion battery is expected to reach USD182.53 billion by 2030.

It is expected that the lithium-ion battery expands at a CAGR of18.1 percent from 2022 to 2030. According to SNEResearch⁹, a South Korean market research institution,the total battery energy requirement for electric vehicles (EVs)reached 202 GWh worldwide in the first half year of 2022. Amongsuppliers, Contemporary Amperex Technology Co., Ltd. (CATL) was theleading supplier globally, with a total capacity of 69 GWh, or amarket share of 34.8 percent in H1 2022. BYD has also overtakenSouth Korea's LG as the world's second-biggest producer ofEV batteries, with a market share of 11.9%.

Bloomberg NEF has ranked China No.1 in raw material, cell &component, and demand of the lithium-ion battery supply chain forthree consecutive years since 2020¹⁰. Not only lithium,but China also controls over 50% of battery–grade metalsrefining capacity across all key materials and Chinese companiessuch as Jiangxi Ganfeng Lithium Co., and Tianqi Lithium Co, haveinvested heavily in mining assets globally.

Is lithium a "green" alternative?

Over the last ten years, the lithium-ion battery has been anenabling technology for mobile electronics to play a vital role inthe world's decarbonisation and reduction of greenhouse gases(GHG). Lithium is crucial for the transition to renewables butmining itself has been environmentally costly.

The production of lithium from mineral resources such asspodumene is energy intensive. It requires a lot of energy thatreleases significant amounts of greenhouse gas emissions andproduces toxic waste streams typically containing surfactants,organic extractants and solvents. For example, each ton of hardrock lithium refined produces 15 tonnes of CO2¹¹. Thelithium brine extraction process not only uses a lot of water– approximately 469 cubic meters per tonne of lithium butcauses water contamination and toxic waste.

To make the supply chain more sustainable, solutions areemerging worldwide. Currently, geothermal brine is a popular,concentrated saline solution that has circulated through hot rocksand becomes enriched with elements such as lithium, boron, andpotassium. The energy-intensive process of extracting lithium fromsolid rock is powered by naturally occurring geothermal energy,which releases zero CO2 emissions at a lower cost compared withtraditional mining methods¹².

Launched in 2019, the EuGeLi (European Geothermal Lithium Brine) project hassuccessfully produced the first kilograms of battery-grade lithiumcarbonate from European geothermal water by the end of 2021. Theirnext step is commercialising the production of lithium on anindustrial scale¹³. Another German-Australian company,Vulcan Energy Resources is also aiming to produce both renewablegeothermal energy and lithium hydroxide for electric vehiclebatteries from the same deep brine source in the Upper Rhine Valleyin Germany¹⁴. The US also owns a geothermal lithiumbrine resource in the Salton Sea in Southern California.

Ganfeng Lithium Group., a China-based company principallyengaged in the research, development, production, and sales ofdeeply processed lithium products has also gone far in the practiceof a greener supply chain. The vice chairman of Ganfeng Lithiumintroduced the sustainable cases of Ganfeng in a "Green SupplyChain Forum" in 2021.¹⁵ In its lithium salt lakeproject in Argentina, sunlight evaporation is used as the mainprocess, while photovoltaic power is used for the rest of theprocess in order to make the mining process green. Meanwhile, toprotect the local ecological balance, Ganfeng has set up abiodiversity reserve around the Mariana project, where night-timelighting is strictly prohibited, and noise is avoided.

Besides, the recycling of lithium materials is another importantpractice of Ganfeng Group. It established Ganfeng Recycle in 2016.As of 2020, Ganfeng's decommissioned lithium batterydismantling and comprehensive metal recycling project has reached arecycling capacity of 34,000 tons, with a lithium recovery rate ofover 90% and a total nickel-cobalt-manganese recovery rate reached98%.

It believes that lithium is the solution to the decarbonisingtransportation industry, yo. For example, to reduce energyconsumption, production plants can use a rooftop photovoltaic (PV)system to generate electricity instead of thermal power generation.It is also important to install continuous monitoring equipment toensure that exhaust gases meet local standards. To make the bestuse of resources, a water recycling system can be built to reusewater resources while achieving zero discharge of wastewater.

Opportunities for foreign investors

China will boost foreign investment, with the manufacturingindustry as a priority, although some factors brought about by thecomplex external environment, putting a dent in the confidence offoreign investors.¹⁶ According to the Ministry ofCommerce, from January to August 2022, the actual use of foreigndirect investment (FDI) into the Chinese mainland increased 16.4percent from the same period the previous year to CNY 892.74billion¹⁷.

According to the Announcement on Issues Concerning theImplementation of the Catalogue of Industries for EncouragingForeign Investment (2022 Version)¹⁸, In this Draft forPublic Comments, it is clearly stated that foreign companies areencouraged to invest in quality power batteries and their relatedproducts in China. The government covers everything from upstreammaterials to the production and preparation of lithium batteries,to the recycling of lithium batteries.

Currently, China's power cell whitelist mechanism hasaccepted Korean companies. LG Chem, South Korea's top batterymaker, has set up a joint venture with Veken Technology to produceand sell lithium-ion batteries in October 2019. Samsung SDIinvested additional funds into Xi'an's facilities to rampup the capacity of its EV battery plant. As China's efforts tofurther encourage foreign investment, it is believed that thethemes listed above may evolve and new investment opportunitiescould also emerge.

Footnotes

¹ Lithium – ForHarnessing Renewable Energy

² USGS.gov, mcs 2021

³ Improving China's Global Lithium Resource DevelopmentCapacity, frontiers, 2022-06-17

⁴ Lithium Resources Industrialization of Salt Lakes in China: A CaseStudy of the Xitaijinaier Salt Lake and the Zabuye Salt Lake,ACTA Geoscientica Sinica, 2010-02

⁵ Decryption of China's four major salt lakes, five majorrefining technical routes, SMM, 2018-11-30

⁶ Ibid.

⁷ Global EV Outlook 2022, IEA, 2022-05-23

⁸ Lithium-ion battery market size worth $182.53 billion by 2030:Grand View Research, Inc., 2022-06-07

⁹ 2022 1H Global EV & Battery Performance Review,2022-07-18

¹⁰ Race to net zero: Pressures of the battery boom in five charts,Bloomberg, 2022-07-15

¹¹ What you need to know about lithium, BNP PARIBAS,2021-07-30

¹² Greener lithium mining: Lithium is crucial for greeningtransportation and energy networks. Canadian Mining Journal,2022-04-18

¹³ EUGELI Project: Extracting European Lithium for Future ElectricVehicle Batteries, eramet.com

¹⁴ Vulcan Energy Resources Corporate Presentation,2022-04

¹⁵ 赣锋锂业出席绿色供应链论坛,分享锂行业的碳中和实践,Ganfeng Lithium, 2021-07-06

¹⁶ China mullsmeasures to further boost foreign investment, China Daily,2022-09-19

¹⁷ Ibid.

¹⁸ TheCatalogue of Industries for Encouraging Foreign Investment (2022Version)