Consider lithium, a key ingredient in these batteries. China holds about 8% of the world’s lithium reserves but processes about 58% of the world’s lithium supply. The situation is similar for other major battery metals. Nickel mined in Indonesia is sent to China for processing, as is cobalt in the Democratic Republic of Congo.
Over the past two decades, China has poured money, resources, and policy into electric vehicles. China currently leads the world in EV registrations, many of the largest EV manufacturers are Chinese companies, and China has a huge portion of the supply chain for cars and their batteries.
As the world begins to transition to technologies like EVs, it is becoming clear how dominant China is in many of the materials essential to building that technology.
U.S. officials say lithium prices have fallen 80% in the past year, in part because of slowing demand for electric vehicles, but also because of China’s oversupply of lithium. By flooding the market and driving prices down, China could make it more difficult for other lithium processors to justify staying in business.
China’s new graphite regulations could also impact the battery market. Graphite is crucial to lithium-ion batteries, which use the material in their negative electrodes. It is not yet clear whether the new ban will affect battery materials or just high-purity materials used in military applications, Carbon Brief reports.
So far, China has not specifically banned the export of key battery materials, and it is not clear how far the restrictions will go. Global trade politics are delicate and complex, and any move by China in the battery supply chain could result in a backlash that would hurt the country’s economy.
But we may be entering a new era of material politics. Further restrictions on graphite, or moves affecting lithium, nickel or copper, could have major ramifications for climate technology around the world. Because batteries play an increasingly important role not only in electric vehicles but also in the power grid.
It is clear that tensions are rising, but what will happen next remains unclear. The atmosphere is uncertain at best, and this kind of uncertainty is why many in the technology industry are focused on how to diversify the global supply chain. If we don’t, we might discover just how complex supply chains really are and what happens when we pull the threads that run through their core.