As geopolitical tensions continue to mount and supply chain challenges loom large across many sectors, Beijing is tightening reins on its critical mineral supply chains.
According to news reports, the Chinese Ministry of Industry and Information Technology announced plans to increase its supervision of China’s lithium battery supply chain, which, according to the ministry, is “severely unbalanced.”
While China accounts for roughly 60% of the world’s lithium chemical supply and has secured a “position of strength within the industry” and “we [i.e. the West] have been very slow to react to that,” as American Lithium CEO Simon Clark has phrased it, Chinese EV producers have been registering financial losses in the face of increasing battery costs. In an effort to counterbalance the undercutting of their profits, the ministry is looking to “curb hoarding, price gouging and unfair competition” in the supply chain – a move that is welcomed by China’s state-owned automakers, who have been calling for a government crackdown on the hoarding of battery materials.
China’s moves in the lithium sector align with other policy shifts in the resource space. Earlier this summer, Beijing established a new state-owned group to serve as a consolidated hub for the country’s iron ore trade with a registered capital of 20 billion yuan ($3 billion). China Mineral Resources Group’s mandate covers mining, ore processing and trading. As mining.com outlines, the company’s creation was “encouraged and closely monitored” by senior government officials in Beijing. These Chinese officials have repeatedly accused the United States and its allies of “ganging up to try to suppress China’s global rise,” and consider the formation of a consolidated trading platform a “way to strengthen the country’s negotiating position in an unfriendly international environment.”
Is China’s iron ore vertical a sign of things to come in the Critical Minerals world? Watch this space, as ARPN tracks Chinese government developments in 2023. But it’s already clear that both moves to further tighten government control over segments of the critical minerals sector tie into newly emboldened Chinese President Xi Jinping’s call for China to increase its self-sufficiency in technology and supply chains during his re-confirmation speech in October of this year. The Wall Street Journal had called Mr. Xi’s re-confirmation for another term in office in October a “coronation,” which effectively “confirm[ed] China’s combination of aggressive nationalism and Communist ideology that is the single biggest threat to world freedom.”
As ARPN has previously pointed out, efforts to decouple supply chains from China may become “all the more pressing in light of current fears that (…) China may retaliate after the U.S. Department of Commerce announced sweeping limitations to semiconductor and chip-making equipment sales to Chinese customers this fall.” With Mr. Xi reportedly seeing the possibility of a showdown with the West as “increasingly likely” in the context of his goal to “restore China to what he believes is its rightful place as a global player and a peer of the U.S.,” America and its close allies would be well advised to move critical mineral supply chain security to the top of their priority lists.
