China is now home to the world’s second-largest lithium reserves, behind only Chile, thanks to a spate of big discoveries. According to the China Geological Survey, China's breakthrough in lithium exploration has boosted its global share of lithium reserves from 6% in 2020 to 16.5% currently, placing it ahead of Australia, Argentina and Bolivia. Since 2021, the country has stepped up efforts in lithium exploration, helping to uncover 30 million metric tons of new lithium ore in places such as Sichuan, Qinghai and Jiangxi provinces.
China has identified more than 14 million tons of lithium in salt lakes, making it the world's third-largest salt lake lithium resource hub. Further, the China Geological Survey says that a technological breakthrough in extracting lithium from lepidolite will help unlock the 10 million tons of newly discovered lithium resources that can be extracted at a lower cost and higher utilization efficiency.
Thankfully, traders will have little trouble partaking in China’s burgeoning lithium sector: In 2023, China’s Guangzhou Futures Exchange launched its first-ever lithium carbonate futures contracts, making it the fourth exchange worldwide to offer such contracts. The introduction of these trading instruments is intended to stabilize prices of raw materials to promote the EV industry's sustainable development. In that short period of time, Guangzhou Futures Exchange's new lithium carbonate business gained more market activity than competitors such as the London Metal Exchange and Singapore Exchange, thanks to China’s dominance in the global lithium supply chain. Maybe that was not too surprising considering that China is the largest lithium consumer in the world.
Booming EV Sector
China’s lithium discoveries come at a perfect time when its electric vehicle sector is really taking off considering that lithium is a key component of batteries that power electric vehicles as well as a plethora of consumer electronic devices. China’s 10 millionth EV rolled off the production line in October, beating the 2023 production seven weeks before the year’s end amid growing worries of overcapacity. Chinese EV makers delivered 9.75 million units to mainland buyers between January and October, good for a robust 34% Y/Y increase. Helped by government subsidies of up to $2,800 apiece for trading in older cars for EVs as well as more fuel-efficient cars, China Passenger Car Association (CPCA) secretary-general Cui Dongshu has predicted that China’s EV revolution will continue undeterred by a faltering economy. Sales of new energy vehicles (NEVs) in China overtook conventional auto sales for the first time ever in July, and now account for more than half of all units sold during the month.
“As EVs outsell conventional petrol cars, more existing production facilities and workers will become redundant. Demand for petrol cars will weaken in the coming years,” Phate Zhang, founder of Shanghai-based EV data provider CnEVPost, told South China Morning Post
BYD Company Ltd (OTCBB: BYDDY) remains China’s biggest EV seller, with sales topping the 500,000 benchmark for the first time in October. BYD reported Q3 2024 revenue of $28.2 billion, good for a 24% Y/Y growth while net profit increased 11.5% Y/Y to $1.63 billion. In comparison, Tesla Inc. (NASDAQ:TSLA) reported third quarter revenue of $25.2B, good for a 8% Y/Y increase while net income rose to about $2.17 billion, or 62 cents a share, from $1.85 billion, or 53 cents a share, a year ago.
That said, China is increasingly looking to protect its bustling EV sector. The Chinese commerce ministry has proposed export curbs on technology essential for battery components and critical minerals processing, including lithium and gallium. Beijing is going down this path again in a bid to protect its dominant 70% market share in lithium processing for EV batteries, as well as support its domestic battery manufacturing giants. The proposed restrictions on lithium battery technologies could hinder the overseas expansion plans of major Chinese battery makers, including CATL.
"These proposed measures would be a move to maintain this high market share and to secure lithium chemical production for China's domestic battery supply chains," Adam Webb, head of battery raw materials at consultancy Benchmark Mineral Intelligence, told Reuters. "Depending on the level of export restrictions imposed, this could pose challenges for Western lithium producers hoping to use Chinese technology to produce lithium chemicals," he added.
By Alex Kimani for Oilprice.com
