China’s Cheaper Lithium Production Scares U.S., Europe

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Employees work at a production line of lithium ion batteries inside a factory in Dongguan (Photo: Reuters)

The Chinese government recently reported that they discovered an easy and cheaper method of producing lithium, an essential ingredient in batteries for electric cars. Europe and the United States are concerned about the rising dominance of China in the battery supply chain. Electric car makers projected that the Asian nation will drive the electric vehicle revolution instead of the United States.

According to the report of the Chinese government, the cost of extracting has been reduced to a "record low" of 15, 000 yuan per ton by the new process. The global estimate of the price of extracting the mineral is between $12, 000 to $20,000. Long-term contract to mine Lithium is about $17, 000.

The data from Benchmark Minerals Intelligence said that despite the relatively low output of Lithium production, China currently dominates the supply of lithium-ion batteries, contributes nearly two-thirds of the world's output. The data also said that it controls most of the world's lithium processing facilities.

As part of the government's goal to reduce carbon emission in the country, draft legislation was presented that aims at streamlining regulation and permitting requirements for the development of mines that gathers lithium, graphite, and other minerals that are used in the manufacture electric cars. According to Lisa Murkowski, one of the senators who introduced the Minerals Security Act said that China's lead in the electric car supply chain sector gives the country an edge in the ongoing trade dispute.

China's drive to lessen carbon emission shifted the automobile industry of China from petroleum-fueled vehicles to electric. China is the largest market in the world for the automobile. Around 23 million cars were sold in the country last year.

The sales of electric cars in the country in 2015 surpassed the United States. China's sales, 1.1 million cars, surpassed the United States sales at 358, 000 in 2018.

The prices of electric cars are dependent on the cost of its batteries. The new method of extracting lithium is expected to lower the prices of electric cars. China currently manufactures half of the electric vehicle batteries in the world. The prices of the batteries in China continue to fall. Analysts projected that it would be cheaper to purchase electric cars than gas or diesel-fuelled cars within five years.

Government policies will also ensure the dominance of China in the battery supply chain and in the development of electric cars. Recently, China mandated that all automakers selling in China should make a certain percentage of their sales in electric.

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