China Makes Strategic Move That Worries Western Companies

According to recent assessments, Chinese companies are expanding their dominance in the mineral market despite years of sanctions.

The Wall Street Journal (WSJ) reported on the 20th (local time) that China is winning the mineral war, with Chinese companies aggressively expanding their businesses, over-supplying, and driving down prices to push out competitors.

According to raw material information company Fastmarkets, the proportion of lithium mined in China or by Chinese companies overseas was only 14% of the total market in 2018, but the figure has increased to 35% this year. The proportion of lithium refined in China during the same period increased from 63% to 70%. Some analyses show Chinese companies are shaking the market by mass production of nickel, which is used in electric vehicle (EV) batteries, after entering overseas markets such as Indonesia. For instance, the Chinese state-owned company Tsingshan Holding Group is aggressively acquiring and expanding its business. It plans to increase its lithium production by 85 times from its lowest point this year and by another five times next year. Chinese companies are actively expanding into resource-rich countries like Indonesia, Mali, Bolivia, and Zimbabwe under government support, which Western companies have labeled as corrupt and unstable.

Western companies are concerned that China’s aggressive trend shows no signs of abating. William Adams of Fastmarkets said, “This is how China does business. China is trying to increase its production capacity in areas such as aluminum, cement, and nickel.” He added, “Chinese companies are all aiming for market share, resulting in oversupply.” A representative from the Canadian mineral company Talon Metals pointed out that it is unfair competition as Western companies have to meet market standards while Chinese companies are supported by policy financing.

The U.S. has made it impossible for EVs using Chinese battery materials to receive a $7,500 tax benefit through the Inflation Reduction Act (IRA). It also recently announced plans to raise tariffs on key minerals like natural graphite. Western companies hope that these policies will revive demand for their products, but there are concerns that companies will seek regulatory bypasses.