Europe's lithium quest hampered by China and lack of cash
Europe's ambition to be a world player in decarbonized transportation arguably depends on sourcing lithium abroad, especially in South America.
Even the bloc's broader energy security and climate goals could depend on securing a steady supply of the key mineral, used in batteries and other clean energy supply chains.
But Europe has run into a trio of obstacles: lack of money, double-edged regulations and competition from China, say analysts.
China has a major head start.
It currently produces more than three-quarters of batteries sold worldwide, refines 70% of raw lithium and is the world's third-largest extractor behind Australia and Chile, according to 2024 data from the United States Geological Survey.
To gain a foothold, Europe has developed a regulatory framework that emphasises environmental preservation, quality job creation and cooperation with local communities.
It has also signed bilateral agreements with about 15 countries, including Chile and Argentina, the world's fifth-largest lithium producer.
But too often it fails to deliver when it comes to investment, say experts.
"I see a lot of memoranda of understanding, but there is a lack of action," said Julia Poliscanova, director of electric vehicles at the Transport and Environment (T&E) think tank.
"More than once, on the day that we signed another MoU, the Chinese were buying an entire mine in the same country."
The investment gap is huge: China spent $6 billion on lithium projects abroad from 2020 to 2023, while Europe barely coughed up a billion dollars over the same period, according to data compiled by T&E.
Lagging investment
At the same time, the bottleneck in supply has tightened: last year saw a 30% increase in global demand for lithium, according to a recent report from the International Energy Agency (IEA).
"To secure the supply of raw materials, China is actively investing in mines abroad through state-owned companies with political support from the government," the IEA noted.
China's Belt and Road Initiative funnelled $21.4 billion into mining beyond its shores in 2024, according to the report.
Europe, meanwhile, is "lagging behind in investment levels in these areas," said Sebastian Galarza, founder of the Centre for Sustainable Mobility in Santiago, Chile.
"The lack of a clear path for developing Europe's battery and mining industries means that gap will be filled by other actors."
In Africa, for example, Chinese demand has propelled Zimbabwe to become the fourth-largest lithium producer in the world.
"The Chinese let their money do the talking," said Theo Acheampong, an analyst at the European Council on Foreign Relations.
A brine pool at a lithium mine in the Atacama Desert, Chile, in 2024. |
Bloomberg
By 2035, all new cars and vans sold in the European Union must produce zero carbon emissions, and EU leaders and industry would like as much as possible of that market share to be sourced locally.
Last year, just over 20% of new vehicles sold in the bloc were electric.
"Currently, only 4% of Chile's lithium goes to Europe," noted Stefan Debruyne, director of external affairs at Chilean private mining company SQM.
"The EU has every opportunity to increase its share of the battery industry."
Shifting supply chains
But Europe's plans to build dozens of battery factories have been hampered by fluctuating consumer demand and competition from Japan (Panasonic), South Korea (LG Energy Solution, Samsung) and, above all, China (CATL, BYD).
The key to locking down long-term lithium supply is closer ties in the so-called "lithium triangle" formed by Chile, Argentina and Bolivia, which account for nearly half of the world's reserves, analysts say.
To encourage cooperation with these countries, European actors have proposed development pathways that would help establish electric battery production in Latin America.
Draft EU regulations would allow Latin America to "reconcile local development with the export of these raw materials, and not fall into a purely extractive cycle", said Juan Vazquez, deputy head for Latin America and the Caribbean at the OECD Development Centre.
But it is still unclear whether helping exporting countries develop complete supply chains makes economic sense, or will ultimately tilt in Europe's favour.
"What interest do you have as a company in setting up in Chile to produce cathodes, batteries or more sophisticated materials if you don't have a local or regional market to supply?" said Galarza.
"Why not just take the lithium, refine it and do everything in China and send the battery back to us?"
Pointing to the automotive tradition in Mexico, Brazil and Argentina, Galarza suggested an answer.
"We must push quickly towards the electrification of transport in the region so we can share in the benefits of the energy transition," he argued.
But the road ahead looks long.
Electric vehicles were only 2% of new car sales in Mexico and Chile last year, 6% in Brazil and 7% in Colombia, according to the IEA.
The small nation of Costa Rica stood out as the only nation in the region where EVs hit double digits, at 15% of new car sales.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Japan Times
2 hours ago
- Japan Times
China criticizes attack on Iran as U.S. asks Beijing for trade route help
China has criticized the United States' weekend strike on Iranian nuclear facilities and reiterated that it's willing to join international efforts to restore peace in the Middle East. Beijing "strongly' condemns the attacks on Iran, according to a four-sentence statement from the Foreign Ministry on Sunday. "The U.S. move seriously violates the purposes and principles of the U.N. Charter and international law and exacerbates tensions in the Middle East,' it said. "China calls on all parties to the conflict, especially Israel, to cease fire as soon as possible.' On Monday, the state-run Global Times added to the criticism, saying the U.S.' use of bunker-buster bombs would push "the Iran-Israel conflict closer toward an uncontrollable state.' U.S. President Donald Trump said American bombers struck Iran's three main nuclear sites and threatened more attacks if Tehran doesn't capitulate, pulling the U.S. directly into the country's conflict with Israel despite his longtime promises to avoid new wars. Beijing hasn't yet offered substantial assistance to Tehran besides rhetorical support. Chinese leader Xi Jinping last week outlined a four-point proposal for the Iran-Israel war in a call with Russian President Vladimir Putin. U.S. Secretary of State Marco Rubio called on China to speak to leaders in Iran about not closing the Strait of Hormuz — the waterway at the entrance to the Persian Gulf where about a fifth of the world's crude output passes through. "I encourage the Chinese government in Beijing to call them about that because they heavily depend on the Straits of Hormuz for their oil,' he told Fox News. China is the nation most dependent on oil passing through the strait, where a third of its crude transits. Tehran could seek to retaliate for the U.S. attack by trying to close the choke point. Iran's parliament has called for closing the waterway, according to Iranian state-run TV — a move that would need the explicit approval of Supreme Leader Ayatollah Ali Khamenei to proceed. Iran has vowed not to back down, with its foreign minister, Abbas Araghchi, saying the country "reserves all options to defend its sovereignty, interest, and people' and warning America's move "will have everlasting consequences.' While China buys some 90% of Iran's oil exports in defiance of U.S. restrictions, the risks of secondary sanctions and the official stance against nuclear proliferation have prevented Beijing from intervening. Some analysts have suggested that a distracted Washington might be good news for Beijing. "If this results in a prolonged U.S. engagement in the Middle East, it would also mean less concentration on Beijing's immediate neighborhood, both militarily and diplomatically,' said William Yang, senior analyst for North East Asia at International Crisis Group. Some Chinese social media users also criticized the U.S. action. "This is obviously intervening with other countries' political regime and domestic politics,' one person wrote on Weibo, getting some 3,800 likes.
Japan Times
7 hours ago
- Japan Times
Europe's lithium quest hampered by China and lack of cash
Europe's ambition to be a world player in decarbonized transportation arguably depends on sourcing lithium abroad, especially in South America. Even the bloc's broader energy security and climate goals could depend on securing a steady supply of the key mineral, used in batteries and other clean energy supply chains. But Europe has run into a trio of obstacles: lack of money, double-edged regulations and competition from China, say analysts. China has a major head start. It currently produces more than three-quarters of batteries sold worldwide, refines 70% of raw lithium and is the world's third-largest extractor behind Australia and Chile, according to 2024 data from the United States Geological Survey. To gain a foothold, Europe has developed a regulatory framework that emphasises environmental preservation, quality job creation and cooperation with local communities. It has also signed bilateral agreements with about 15 countries, including Chile and Argentina, the world's fifth-largest lithium producer. But too often it fails to deliver when it comes to investment, say experts. "I see a lot of memoranda of understanding, but there is a lack of action," said Julia Poliscanova, director of electric vehicles at the Transport and Environment (T&E) think tank. "More than once, on the day that we signed another MoU, the Chinese were buying an entire mine in the same country." The investment gap is huge: China spent $6 billion on lithium projects abroad from 2020 to 2023, while Europe barely coughed up a billion dollars over the same period, according to data compiled by T&E. Lagging investment At the same time, the bottleneck in supply has tightened: last year saw a 30% increase in global demand for lithium, according to a recent report from the International Energy Agency (IEA). "To secure the supply of raw materials, China is actively investing in mines abroad through state-owned companies with political support from the government," the IEA noted. China's Belt and Road Initiative funnelled $21.4 billion into mining beyond its shores in 2024, according to the report. Europe, meanwhile, is "lagging behind in investment levels in these areas," said Sebastian Galarza, founder of the Centre for Sustainable Mobility in Santiago, Chile. "The lack of a clear path for developing Europe's battery and mining industries means that gap will be filled by other actors." In Africa, for example, Chinese demand has propelled Zimbabwe to become the fourth-largest lithium producer in the world. "The Chinese let their money do the talking," said Theo Acheampong, an analyst at the European Council on Foreign Relations. A brine pool at a lithium mine in the Atacama Desert, Chile, in 2024. | Bloomberg By 2035, all new cars and vans sold in the European Union must produce zero carbon emissions, and EU leaders and industry would like as much as possible of that market share to be sourced locally. Last year, just over 20% of new vehicles sold in the bloc were electric. "Currently, only 4% of Chile's lithium goes to Europe," noted Stefan Debruyne, director of external affairs at Chilean private mining company SQM. "The EU has every opportunity to increase its share of the battery industry." Shifting supply chains But Europe's plans to build dozens of battery factories have been hampered by fluctuating consumer demand and competition from Japan (Panasonic), South Korea (LG Energy Solution, Samsung) and, above all, China (CATL, BYD). The key to locking down long-term lithium supply is closer ties in the so-called "lithium triangle" formed by Chile, Argentina and Bolivia, which account for nearly half of the world's reserves, analysts say. To encourage cooperation with these countries, European actors have proposed development pathways that would help establish electric battery production in Latin America. Draft EU regulations would allow Latin America to "reconcile local development with the export of these raw materials, and not fall into a purely extractive cycle", said Juan Vazquez, deputy head for Latin America and the Caribbean at the OECD Development Centre. But it is still unclear whether helping exporting countries develop complete supply chains makes economic sense, or will ultimately tilt in Europe's favour. "What interest do you have as a company in setting up in Chile to produce cathodes, batteries or more sophisticated materials if you don't have a local or regional market to supply?" said Galarza. "Why not just take the lithium, refine it and do everything in China and send the battery back to us?" Pointing to the automotive tradition in Mexico, Brazil and Argentina, Galarza suggested an answer. "We must push quickly towards the electrification of transport in the region so we can share in the benefits of the energy transition," he argued. But the road ahead looks long. Electric vehicles were only 2% of new car sales in Mexico and Chile last year, 6% in Brazil and 7% in Colombia, according to the IEA. The small nation of Costa Rica stood out as the only nation in the region where EVs hit double digits, at 15% of new car sales.
Japan Times
8 hours ago
- Japan Times
Honda supplier rethinks China relationship as trade war bites
As the U.S.-China trade war expands into the auto, steel and rare earths sectors, few companies are feeling the pressure more than top Japanese car parts supplier Daido Steel. The supplier to Honda and other major marques is facing a trio of headwinds: a 50% tariff on U.S. imports of steel, a 25% duty on foreign-made cars and a levy on parts, and China's tightening of exports of rare earths — minerals critical to make magnets for car motors. "They've started putting up walls,' CEO Tetsuya Shimizu said in an interview at Daido Steel's headquarters in Nagoya. "This will have a massive impact on the stability of the global economy.' It's also having major implications for the sprawling network of specialty manufacturers that are critical to the global automotive industry and now find themselves stuck between feuding superpowers. For Daido Steel, the trade war has meant renewing a push to build rare earth supply routes outside of China, which accounts for almost 70% of mined material and about 90% of global refining of the metals. Some new routes are already starting to form, mainly from Australia, and Shimizu said there's potential in the United States, Canada and Brazil. But progress has been slow due to high costs and low supply, he said, underscoring the immense challenge facing the world's efforts to wean from dependence on China. Daido Steel's struggles also signal the true toll of the trade war on the auto sector will be magnitudes more than the billions of dollars forecast by top carmakers including Ford and Toyota. And the constant roller coaster of escalating, then deescalating, tensions has left companies scrambling to maintain business ties under a cloud of uncertainty. When U.S. President Donald Trump initially imposed 25% tariffs on steel imports in March, Shimizu was able to reassure clients in the U.S. that business could continue as normal. Customers value Daido Steel's products enough to wait months for shipments to arrive and, if they could buy comparable goods domestically in the U.S., "they'd already be doing it,' he said. But his confidence vanished earlier this month when duties doubled. "At some point it stops making sense as a business,' Shimizu said. "Asking customers to pare back orders or lean on inventory or lower production could negatively impact the entire enterprise, but that risk might be unavoidable.' Daido Steel CEO Tetsuya Shimizu | Bloomberg Daido Steel earns most of its money supplying products to Japan's automakers — many of which sell cars in the U.S. that are manufactured or assembled elsewhere. Collectively, the top Japanese auto brands are bracing for a $19 billion hit from tariffs. Several Japanese carmakers have already started to shift or lower U.S. production, leaving suppliers like Daido Steel at the mercy of their customers' rapidly changing plans. In May, the steelmaker withheld full-year profit guidance for the current fiscal year and forecast a 34% drop in first-half net income. "It comes down to how carmakers respond,' said Mikine Kishi, general manager of the company's corporate planning department. "If they decide they're not going to manufacture in Japan anymore, or that they'll lower total production volumes, that would have an extremely big impact on our business.' The U.S. and China appear to have reached a detente, and Trump has signed an order that prevents multiple tariffs from piling on top of each other. But rare earths are proving to be a particular sticking point in trade negotiations. China's export controls on seven individual elements, and magnets that contain even tiny amounts of them, left sectors from auto to defense urgently trying to find workarounds. Uncertainty over supply lingers, though Beijing said this month it is accelerating the review of rare earth export license applications and has approved some requests. Daido Steel had a head start in diversifying its supply chain. Back in 2010, China briefly imposed a de facto ban on exports of rare earths to Japan following a maritime dispute, kick-starting industry efforts to break their reliance on the nation. Success has been limited though: Japan depends on China for 60% of its rare earths supply, down from 80% to 90%. As well as seeking alternative supplies, Daido Steel focused on new technology to use fewer rare earths. One of the company's key products is a neodymium magnet that doesn't include heavy rare earths, including dysprosium or terbium, which has been used by Honda since 2016. Daido Steel also supplies magnets indirectly to automakers by way of Aisin and Denso — two of Japan's biggest suppliers. Daido Steel wants to expand production and industrial use of those magnets, betting that customers will increasingly look for non-Chinese supply. It also plans to build a manufacturing plant in the U.S., though Shimizu didn't specify when or where that will happen. It would be a major disappointment if the U.S. should slide into authoritarianism, Shimizu said, because that would mean the global economy will eventually have to revolve around America. "I'm not sure there's enough time for supply chains to transition if the goal really is to produce everything in America for America,' he said.
