CHINA WILL BE VERY MUCH SHORT IN LITHIUM

CHINA WILL BE VERY MUCH SHORT IN LITHIUM.

• THE DEMAND FORECAST IS NOW OVER 4MT LCE FOR 2030.
• TODAY THE WHOLE PRODUCTION IS ONLY AROUND 1.4mt.
• NOT POSSIBLE TO REACH TO 4MT IN 2023.

• THE WHOLE LEPIDOLITE PRODUCTION IS ONLY AROUND 120kt IN CHINA.
• IT WILL INCREASE TO 200kt IN 2030 BUT STILL A DROP IN THE OCEAN.
• THEIR TOTAL PRODUCTION TOHETHER WITH BRINE AND SPOD IS ABOUT 300kt.
• 300KT PRODUCTION IS 20% OF THE DEMAND NOW.
• THEY ALSO HAVE THE SAME RATION FOR IRON PRODUCTION
• BUT THEY STILL HAVE TO BUY 80% IRON ORE AND PAY PREMIUM PRICE
• LITHIUM IS GOING OT BE THE SAME.

• BTW, CHINA IS DEPLETING ITS STARTEGIC RESOURCES.
• THEY WILL HAVE NOTHING. IN 10 TO 15 YEARS

• CHINA KNOWS ALL THESE VERY WELL.

• THEY HAVE BEEN KICKED OUT FROM ALL COUNTRIES WHICH HAVE HUGE LITHIUM RESOURCES; AUSTRALIA, CANADA, CHILI,
• THEY ONLY HAVE 3 LANDLOCKED AFRICAN COUNTRIES IN HAND; ZIMBABWE, MALI AND DRC.

• BUT THE AFRICAN NATIONS HAVE WOKEN UP.
• ESPECIALLY FOR LITHIUM.
• THEY WON'T GIVE THEIR LITHIUM FOR FREE.
• THEIR GOVS WANT TO MAKE MORE MONEY FOR THEIR RESOURCES.

• ALSO THE US GOV IS NOW MAKING NEGITIATION FOR STARTEGIC MINERALS WITH DRC. IT'S ACTUALLY POLITICAL TALKS.

• THE CHINESE WILL NOT BE FREELY DOING WHAT IT WANTS TO DO.

• THIS IS ALL HAPPENING BECAUSE THE US HAS WOKEN UP FOR LITHIUM.

There is one thing which we need to understand very well in my opinion that China's grip on the raw materials is very much political than economical. Therefore, the western countries, especially the US know that very well and will do its best for not allowing China to play this game as it likes.

I said China's intention is well know by the West. Yes you can see many signals coming at that tone from various sources, even I can see statements coming from the government levels. So we must look at everything in our industry from that perspective and watch what is going to be unfolded slowly or quickly. As you can see even our CEO/MD Tony was recently talking at that tone at the forum.


THE LITHIUM WARS WILL CONTINUE AT GOVERNMENT LEVELS.

These statements which was taken lightly before, are now being serious things;

The United Nations said "lithium-ion batteries the “critical pillar in a fossil fuel free economy."

The US Energy Department has also identified lithium as a material “essential to the economic or national security of the United States.”

I think REE is less important then lithium as the REEs are easier to produce for the west and there is already two major producing mines and plants in the West (one in Aust and one in the US).

CHINA SPENT A LOT OF MONEY AND ENERGY TO BUILT ITS DOMINANCE.
YES BUT YOU CAN'T BUILD EVERYTHING IN JUST 25 YEARS.
THERE ARE MANY OTHER THING SHOULD HAVE BEEN BUILT TOO.

China has built its influence over these minerals and the industries that rely on them over the years. While developing its battery and EV industry at the same time China worked with governments which are keen on foreign investments mainly in Africa and South America.

Many Chinese companies from upstream (Tianqi and Ganfeng) to downstream (CATL and BYD and many others), from miners to battery and to EV manufacturers have jumped into this game.

They continued to do business whether they make profit or loss because the Chinse gov poured more than US$20b money into this sector over the last 15 years or so.

As a result the Chinese companies have built the downstream supply chain including a lots of lithium refineries and converters in China and made advanced battery and EVs with technological innovations (only CATL holds 30k patents) and expanded their production capacities.

POST COVID - RECORD LEVEL LITHIUM PRICES

The robust demand after Covid 19 caught the Chinese battery and EV manufacturers unprepared in 2021 and they had to pay very high prices for the raw materials in the 2nd half of 2021 and in 2022. Btw, the battery and EV makers had to reduce margins and there was a though competition between them.

THE CHINESE STARTS TO ACQUIRE MORE OVERSEAS LITHIUM ASSETS

The Chinese companies have been very active in acquisitions of lithium resources all over the world, especially after 2021 when the lithium prices started to escalate and reached to record levels in 2022.

The most active companies in the lithium asset acquisition space were Ganfeng, Tianqi and Zijin. The battery maker CATL and battery-EV maker BYD did not expand as much like the others, because they were very busy in their own areas.

During the record high lithium prices in 2022, the Chinese upstream players started to make more overseas asset acquisitions. They were everywhere; Australia, Canada, Mexico, Chili, Argentina, and of course in the African countries.

BUT IT WAS NOT BEING EASY FOR THE CHINESE TO ACQUIRE TIER-1 LOW COST ASSETS IN THE MINING FRIENDLY REGIONS OF THE WORLD.

NOW, EVERYONE HAS WOKEN UP ..!

AUSTRALIA-CANADA-MEXICO ----> NO WAY IN FOR THE CHINESE..!

Australian FRIB (Foreign Investment Review Board) was not looking the Chinese investment in critical minerals. Canada was even harsher. They kicked out even the existing projects under the newly introduced Investment Canada Act. Mexico did the same, nationalized all critical mineral projects. Ganfeng had to leave its two lithium projects there.

CHILI GOV HAS DONE SEMI-NATIONALSATION
GETS THE MAJORITY STAKE (BY THEIR NATIONAL COMPANY CODELCO) AND DOUBLED THE ROYALTIES. HARD TO MAKE MONEY IN CHILI NOW..!
Chili which is the largest lithium supplier after Australia did not fully nationalise its lithium assets but, in 2023, President **riel Boric announced a national lithium strategy that significantly increases state control over the industry while still allowing private investment. Chile’s lithium industry has become a state-led model.

The state-owned company Codelco has started to play a central role in lithium projects. For strategic lithium deposits, such as those in the Atacama and Maricunga salt flats, the state will hold a majority stake in partnerships with private companies. Also, starting in January 2031, Codelco will hold a majority share in lithium contracts, making the state the primary shareholder in these operations.

For example, a significant joint venture between Codelco and SQM was approved in April 2025 to expand lithium production in the Atacama salt flats. This partnership allows SQM to continue operations while Codelco holds the majority stake.

Meanwhile, total cash costs for lithium mining in the country almost doubled in 2022 because of the government’s lifting of royalty payments.

BYD and Tsingshan (another Chinese co) have withdrawn from planned lithium cathode manufacturing plants in Chile on May 9, 2025. They said a prolonged drop in lithium prices, impacting the viability of the projects. But the truth was not that.

Because, right after that RIO signed a deal with Codelco.

The Chinese is out, the westerns are in.

ARGENTINA IS NOW A BETTER PLACE FOR CHINESE TO HAVE SOME BRINE ASSETS DESPITE BEING LOWER QUALITY AND HIGHER COST THAN CHILI.

Argentina has a more developed mining industry and has become the leading destination for the Chinese. The brine assets here have lower grades than Atacama assets however offers more mining-friendly policies and lower royalty rates than Chili. That was OK for the Chinese.

However, even the Argentina is not safe for them. It's mining friendly, but it is also western friendly. The right wing gov of Argentina could take some advantages from the US and could kick the Chinese out as Canada did by just making a new law. So simple.

Argentina is definitely a western friendly country. In any type of war they will be at the side of western countries.

There are many Chinese owned or JV lithium projects in Argentina which have been started in 2023, but the whole Chinese imports from Argentina is till no more than 50ktpa LCE today. That's not much in comparison to what have been invested.

AFRICA HAS BEEN THE LAST RESORT FOR CHINESE.
THERE IS NO OTHER WAY TO GO..!

BUT THE AFRICANS HAVE WOKEN UP TOO..!ESPECIALLY FOR LITHIUM.
THE AFRICANS WON'T GIVE THEIR LITHIUM EASILY AND CHEAPLY.

The Chinese have major lithium mines in Zimbabwe and Mali, and they are now building a mine at Manono DRC. All of them are landlock countries. I mentioned about the issues of mining in landlock countries or you can even imagine yourself.

But the main problem is the African countries have all woken up how they know the strategic importance of lithium. Yes they all have smartphones and can search about lithium by using Google. Easy.

China has a strong presence in the DRC, there are couple of big Chinese mines in the Katanga province at the south. So the Chinese knows DRC well and they can do things there. But it's not the issue what I was talking about.

You can just say "All done! We transported all the material to the site, we constructed the plant, we have started the production, we built the roads, and we will send the goods to the ports and transport them to China".

No it doesn't work that way. You have to deal with these African countries, with their governments and locals, including resident and armed rebels. if you can remember I said on one of my posts that the government officials, armed groups and rebels at the area won't touch you until you build the plant. When you finish the plant and mine construction and start exporting then the African players comes to the stage.

I also explained on my previous post what is going on in Mali and Zimbabwe. The Chinese know that politics and the mining conditions can change very quickly in Africa.

There are many examples of that.

" Canadian junior miner caught up in corruption, murder scandal in Kenya"
"...when a man named Najib Balala was appointed cabinet secretary of mining. He quickly started making noises about nationalization, suggesting Kenya was not getting enough from its mineral resources. In 2013, the company’s licence for its Mrima Hill niobium project was cancelled by the government under suspicious circumstances, prompting cries of corruption and an international arbitration case being launched against Kenya. But all that turned out to be a precursor to something much worse. On May 5, Pacific Wildcat filed all its evidence in Washington for the US$2.1-billion arbitration case. Later that day, a director from its Kenyan unit was shot dead in Nairobi."

This is another one. Companies involved are quite large corporations.
"Tanzania scraps license of Barrick Gold, Glencore Kabanga nickel project"

These examples below are just a few. There are many more of these. Those companies are taking their cases international arbitration court. (I think AVZ did the same). International arbitration is a long and costly process, but it is enforceable and can lead to big payouts for companies whose assets have been expropriated in foreign countries. However even those big payouts are very little in comparison to the values of the mining projects.
......

The US gov and the DRC gov are now close to signing a critical minerals pact. (Yesterday's news)

Now something more important is happening. The US gov and the DRC gov are in talks for strategic mineral deals.

The news from yesterday from The Australian; "AVZ moves step closer to great escape from the DRC"
" The Trump administration and the DRC are now close to signing a critical minerals pact after DRC President Felix Tshisekedi sought US protection from Rwanda-backed M23 rebels that had overrun parts of his country. The US State Department published a declaration of principles between DRC and Rwanda that provides a framework for peace, and AVZ and KoBold confirmed they were working a deal on Manono since The Australian’s exclusive report.

This is very important news. The consequences of this political deal will be greater than AVZ-KoBold deal.

So, China knew these negative things would or might happen even in 2023 and decided to develop their own resources at that time (which all explored and defined before)

LET'S GO BACK TO 2023...

THE CHINESE GOV WAS INCREASINGLY AWARE OF CRITICAL MINERALS ISSUES IN 2023,

AS THE CHINESE COMPANIES FACED INCREASINGLY RESTRICTIVE ACTIONS OVERSEAS.

THEY KNEW THEY MUST USE THEIR OWN RESOURCES,
AT THE EXPENSE OF DEPLETING ALL OF IT.

China is the world’s largest steelmaker, however its steel industry relies on imports to meet 80% of its iron ore needs. The 80% ratio is very similar to lithium imports. The overseas iron ore companies (mainly BHP and RIO) are controlling the price and production of iron ore. How would China control the lithium price!

China was very well aware that the lithium is much more strategic than iron ore. Because it's an energy metal, is the main raw material of electrification. It's the crucial metal which provides energy impendence. They couldn't replace lithium by another mineral either. Even the salt (sodium) can't help it much.

In March 2023, the Chinese lithium-battery-EV companies called for support from the CCP. There was an annual “two sessions” meeting of the National People’s Congress (NPC), China’s top legislative body. And the CCP decided to help out the supply chain with subsidies. (we don't know how and how much though).

In 2023, the lithium price was still quite high.However China companies started to built their own lepidolite mines and brine plants in China. The majority of those resources were very low grade but they were quite profitable at US$25k-30k/t (200k-240k RMB) levels.

Even CATL and BYD invested in and owned some of those mines.



The lithium carbonate production from lepidolite was coming to a very high cost. Waste was huge and poisonous. For making 1t of lithium carbonate they had to produce 25t of waste which was more than 3 times waste than producing it from spod.

Majority of those lepidolite resources had very low grade of lithium as well. Production cost was very high but they still could make money that time.

When the lithium price went down they closed majority of those mines.

But now they are all open and working at max capacity even though the lithium price 1/4th of what it was in 2023.

All lepidolite mines in China (including the integrated and high grade) are making loss now due to the low price for lithium carbonate at US$8750 (or RMB 62,000).



The Chinese gov tells the miners to keep operating. Obviously they subsidise them all.

Btw, their lepidolite production is not enough to close the deficit gap in 2030 either. It was around 80kt-100kt in 2024. We can see that it should be around 120kt. And it can be increased to 250kt in 2030 they say.



If we consider the LCE demand will be around 4mt in 2030 (the min forecast is 3.2mt) the 250kt is not going to be even 10% of that.

The brine production in China now much higher than lepidolite production. It might be around 150kt this year. (See the table given by Bloomberg some time ago).

That gives a total production by Chinese resources around 300kt LCE all together.



If we consider the global demand at 1.5mt LCE, the Chinese production from their own resources is being 20% of demand and production.

Btw, the Chinese lithium resources are being depleted and no strategics reserves will be left in 10 to 15 years. That is the most critical part of all these issues.

CONSLUSION

In order for China to win the race for industrial and technological superiority over the West, securing critical mineral resources is of vital importance. This is very easy to see.

China has continued to pursue these resources globally for the last 5 years, but has encountered obstacles in many countries with rich resources. That is easy to see as well.

There are two countries and regions left where China can move freely, Argentina and Africa's landlocked 3 countries. Negative things can happen in these countries at any time, and China's supply from these countries can also decrease significantly.

For this reason, it has decided to process lithium resources in its own country at a high cost and even for the sake of finishing its strategic resources in a short time. Of course, the Chinese state has to compensate for the losses of these miners.

Western countries, especially the US, and especially the Trump government, have completely changed their perspective on China and even accused China of manipulating the prices of critical minerals.

It seems that the area where China can move freely in terms of critical minerals is gradually narrowing.

In an industry that grows over 30% every year, it is impossible for China to keep up with this growth and keep its supply chain competitive.

The demand that is 1,500kt LCE this year, and it will be 1,950kt LCE next year by the 30% increase. Let's say supply and demand are balanced this year.

But closing the 450kt LCE demand gap in just one year is not possible in this very low lithium price environment. There are no projects advancing. The expansions are all put in halt.

The difference of 450kt LCE in one year is more than or equal to the total amount of spodumene produced in Australia this year. (3.6mt spod concentrate).

All of this shows that China is cornering itself more and more as it increases battery and EV production.

And this will cause a huge explosion in lithium prices.