One of if not the most important background element of the current US-China trade war is the global race for lithium reserves, an essential ingredient of electric vehicle batteries. China not just stands to gain here, but a new technology may allow the Asian country to exploit her own reserves at unprecedented efficiency.
A 15-year research project in the isolated and harsh environment of the Tibetan Plateu has borne fruit. A state-owned company, the Quinghai Lithium Industry, has been running a successful lithium-mining operation based on a new extraction process for three years.
The tricky part of the extraction of lithium from the brine of the salt lakes is the separation from other other elements, especially magnesium. The extraction includes multiple processing stages with complex electronic and membrane filtering treatments.
The breakthrough technology the company utilizes, allegedly, slashes the production costs of lithium to a fraction ($2180) of the international price, which ranges from $12,000 to $20,000 per tonne. According to their allegations, the company has been operating with a 50%+ profit margin for 3 years.
Although China is among the countries with the most lithium reserves (the exact position is disputed), her output of lithium is relatively low – some 9% of the global production. Yet China dominates the supply chain. Two-third of the lithium-ion batteries are produced in China, and the Asian giant controls most of the world’s lithium-processing facilities. The main producers of this key mineral, such is Australia and Chile, sell most of their output to China. The latter is pushing so hard to buy-up lithium mines and reserves around the world that some call it hoarding.
The most expensive component of an electric vehicle (EV) is the battery with up to 50% of the costs in some cases. It’s easy to see how much competitive edge a technological breakthrough in extraction would give to China in global EV and battery production and sales.
China bet on the electric transition to become the world’s #1 supplier of EVs. If China can boost her own lithium production and can control the international price and supply of the ’light petroleum’, that means, among others, cheaper EVs made by her domestic brands and a very strong position in the ongoing and possible future trade wars.