/ world today news/ The development of the political situation in the world increasingly speaks in favor of the fact that the world economy will gradually deviate from globalization to the regionalization of industry and trade, to the creation of trade blocs. And large countries are increasingly interested in creating their own – independent of imports – key sectors of the economy.
But the traditional sectors are already in an established system of interconnections, the disruption of which is a separate and slow job. In this context, it is interesting to see how events develop in new segments. Will they be built primarily as intra-block stories or initially as global stories? In energy, one such new object of observation is the electric vehicle sector, and more broadly the “lithium mining – processing – battery production – actual production of electric vehicles” chain.
One of the sensational and revealing stories of recent days here was the decision by the Chinese company CATL to postpone the construction of a plant for the production of batteries for electric vehicles in the United States after Nancy Pelosi’s visit to the island of Taiwan. The planned volume of investments is five billion dollars. KATL is the largest manufacturer of batteries for electric vehicles, accounting for over a third of this market. The company supplies batteries to many major electric vehicle manufacturers around the world.
What else is there in this solution? A demonstration of position at a crucial time (which is important inside China) or concerns about the long-term fate of their US investments?
That being said, there are at least two reasons why CATL would want to invest in the US. First, with such a high market share, companies need to expand geographically to grow. Second and most importantly, recent US legislative initiatives are important in this case.
On Tuesday, Joe Biden signed the so-called Deflation Act. It, in particular, dramatically changes the situation with tax incentives for the purchase of electric vehicles in the United States. The tax credit (up to $7,500) will only be available if at least 40% of the battery materials are produced in the United States or in countries with a free trade agreement (in the case of lithium, these are Chile, Australia, Canada ). There is an exception for Argentina. And by 2026, the share of such materials should grow to 80%. Also, the EVs themselves would have to be manufactured in the US.
In fact, the US wants, as far as possible, to create a complete production cycle on its territory or on the territory of friendly countries. Here, comments in the context of the regionalization of world trade are superfluous. We have already said earlier that Russia plans to develop its own lithium mining, although we are not yet in the lead in terms of the volume and quality of reserves. But the very high prices of lithium raw materials make it possible to invest even in projects with not the lowest price. However, the same can be said for the US and Canada. Right now, fairly token amounts of lithium are being mined there, but there are many projects in the pipeline, including unconventional mining. Here it is extracted from rocks and from underground salts and waters. High prices so far allow not even to think about possible import duties to fight competitors – every production turns out to be profitable, the only question is the amount of excess profit.
In one way or another, the new American law has strained almost all market participants. Mining companies are already thinking about how to quickly increase production in the “right” countries.
Asian automakers are also experiencing problems. For example, Hyundai manufactures almost all electric vehicles sold in the US and EU directly in Korea, which in turn is 80% dependent on lithium hydroxide supplies from China. Korean battery manufacturers account for a third of the global market. About the same dependence on Chinese supplies of lithium hydroxide and Japanese companies.
The European Union expresses similar concerns. The European Commission previously requested the removal of amendments that discriminate against electric vehicles produced in the EU. By the way, CATL, which paused the construction of a battery factory in the USA, announced a similar production in Hungary with investments of over seven billion euros.
The processing of raw materials is a separate story. Here and below, when we talk about recycling, we do not mean the secondary processing of batteries, whose impact on the market is still small, but bringing the lithium raw materials to the necessary compounds and purity. The United States does not hide that one of the tasks of the new solution is not only to rely on its own mining and production in friendly countries, but also to reduce dependence on China. China is a fairly large producer of lithium, but still ranks third behind Australia and Chile. And given the strong domestic demand, it seems they have nothing to worry about. But China is a leader in recycling. Incidentally, a significant proportion of the spodumene (lithium-containing mineral) concentrate from Australia is now also processed in China. As a result, the PRC has over 60% of the world’s capacity to process lithium raw materials to the purity required for battery production. By comparison, the United States has about seven percent.
Why is recycling concentrated in China? Apart from geography, there are two factors – price and ecology. And, strictly speaking, they are interconnected. It is clear that in theory it is possible to meet the highest environmental requirements for processing, but only in this case the volume of investments will increase further. Either way, the capital cost of lithium processing facilities in the PRC turns out to be twice as low as in the US and Australia. Processing in South America (where, we recall, there is a lot of lithium mining) is cheaper than in the US, but more expensive than in China.
It is curious that the possible transfer of lithium compounds to higher was discussed a little earlier in the EU. If such a decision is taken, it would derail the European Union’s plans to create its own capacity to produce lithium compounds for batteries, which are now virtually non-existent. Against this background, Great Britain is preparing its new recycling project, and if everything goes according to plan, this plant alone will provide 15% of Europe’s needs for pure lithium product by 2030.
Let’s summarise. A new law that excludes tax credits for most electric vehicles sold in the US could even lead to a drop in sales and, accordingly, a revision of stated goals to fight climate change (we leave out how much electric vehicles actually help solve environmental problems problems). However, the US has decided this to create its own industry.
There is every reason to believe that such trends will be characteristic of almost all major countries or blocs. This also applies to our country, although Russia does not feel a clear need for electric vehicles. But storage isn’t just limited to electric vehicles. We remind you that the construction of a large factory for the production of batteries is planned in Kaliningrad. Various options for mining lithium in our country are being discussed.
In the latest news: Tatneft has announced plans to extract lithium (and other minerals) from aquifers raised during oil production. It is very likely that this project will be the first stone laid in the foundation of one of the most promising industrial sectors today.
Translation: V. Sergeev
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