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China - A Strategic Investor In The Rapidly Growing Lithium Industry

  • June 02, 2019 08:20 AM AEST
  • Team Kalkine
China - A Strategic Investor In The Rapidly Growing Lithium Industry

Lithium market is one of the hottest topics in the global market, also considered as controversial as Bitcoin by some analysts. Lithium is currently undergoing a demand surge amid rapid electrification in the automotive industry and the emergence of players like Tesla and its electric car ‘Tesla Model S’.

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The demand boom has been mainly caused by the increased global stance to curb the environmental pollution, which in turn, marked an extensive commitment from various nations to curb the environmental pollution in line with Euro -6 standards.

Significant economies such as China and Japan have declared substantial incentives to promote the cause and to increase the research on electric transportation.

The high incentives and increased stance to cut down the pollution led towards the resurgence of the electric vehicle market, and with its emergence, lithium metal gained a strategic advantage, thereby pushing the prices of lithium commodity.

The lithium carbonate powder is the component that supplies energy inside the battery, which powers the engine of the electric vehicles. The prices of this lithium carbonate are currently higher than US$ 11,500 a tonne in the global market.

As per the estimation of behemoth car manufacturers such as Volkswagen, the demand for lithium carbonate is expected to get double by 2023.

However, with such an expected demand boom, the question which worries is “who is going to feed the demand to the market.”

The strategic status of lithium gives advantage to China as it holds and controls ample supply of the lithium market. The Xinyu city in China used to initially supply the lithium to China’s nuclear weapon industry in the 1960s, but now, the city supplies the commodity to Tesla, BMW, etc which in turn, makes China, a significant player in the lithium market, as per market analysts.

As per data from the Benchmark Mineral Intelligence, China produced over 60% of the World’s lithium in April 2019, while, the United States just produced about 1% of it.

China now holds and produces an ample amount of battery raw materials as compared to other nations across the globe. China’s superior position in the rapidly growing lithium industry concerns Washington, which now fears that they might get squeezed out of the fast-growing lithium industry.

The high growth potential of the sector is mainly due to the fact that the global economies are trying to shift towards a zero-emission economy, which, in turn, is making them more carbon resilient.

The high carbon resiliency could mark an extensive capital expenditure on lithium energy-based transportation projects, which in turn, could overall boost the sector, and as China seems to dominate the supply side of this emerging market, it holds a strategic advantage.

However, on the demand side, a lithium carbonate substitute- Lithium Hydroxide has marked a slower than projected growth. If the same predicted boost in demand for lithium carbonate gets hamper, China could lose the strategic advantage it is currently holding in the lithium market.


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