From solar panels to wind turbines and electric vehicle (EV) batteries, demand for the technologies to power the transition to green energy is skyrocketing. Chinese companies have already amassed dominant positions in the renewable energy market, and its mineral suppliers stand to gain enormously. Western governments are waking up to the importance of securing these inputs — the so-called ‘critical minerals’ — with the U.S., Canada, UK and EU scrambling to put together strategies.
At The Wire, we’ve covered this global competition and the Chinese companies and characters involved: from copper to cobalt, lithium, nickel, and others. But it’s worth taking a step back to ask what these minerals are used for, and how much of them we need. This week, The Wire examines these questions and takes stock of China’s role in their supply chains.
CRITICAL MINERALS: WHAT ARE THEY GOOD FOR?
The term ‘critical minerals’ is fuzzy — countries have different definitions — but they mostly agree on a few, including cobalt, graphite, rare earth metals, lithium and aluminum.
The largest source of new demand for critical minerals is the battery sector. Lithium-ion batteries require a host of different critical minerals to run, including graphite, cobalt, lithium and nickel. Electric vehicles contain six times as many minerals as conventional cars, most of which are used in the batteries. About half of new mineral demand growth from clean energy technologies over the next two decades is expected to come from EVs and battery storage, according to IEA projections.
Even for technologies whose component metals are relatively common, the minor ingredients still matter. Rare earths make up a small fraction of the metal in a wind turbine, but they’re an essential ingredient in the permanent magnets used in their generators. Demand for rare earths for wind power alone is expected to triple by 2040, according to the International Energy Agency (IEA). Already, prices have reached historic highs this year.
HOW MUCH DO WE NEED?
While it’s clear that the energy transition is going to require lots of metals, not all of them are in short supply. The wide range of applications for minerals like copper and aluminum mean that the proportion that goes to clean energy technologies right now is relatively small.
Where clean energy technologies dominate demand is in the markets for graphite, nickel, cobalt and lithium. According to data from the U.S. Geological Survey, global production of these minerals is relatively small — 170 thousand tons of cobalt was mined last year for example, compared to 21 million tons of copper — owing to their fewer practical applications.1Page 52-55
But demand for all of these metals is expected to rise. The IEA estimates that by 2040, 40 percent of total demand for copper and rare earths will come from clean energy technologies. In smaller markets, up to 70 percent of nickel and cobalt demand, and almost 90 percent of lithium demand, is expected to come from clean energy.
CHINA’S SUPPLY ROLE
All along the mineral-to-green-energy supply chain, China has managed to build a formidable lead over the West, particularly in the markets for graphite, cobalt, nickel and lithium. It is particularly dominant in the processing of minerals, even in sectors where its share of extraction isn’t particularly high. For example, 93 percent of manganese — which is used in permanent magnets — is processed in China, even though just 6 percent is extracted there. It also processes roughly two-thirds of all cobalt, nickel and lithium, and all of the world’s graphite.
How did China become so dominant in processing? One reason is that critical minerals like lithium weren’t considered strategically important to Western economies until recently. “Many minerals were considered on the low end of the value chain,” says Henry Sanderson, executive editor at Benchmark Mineral Intelligence. For decades, the largest source of demand for lithium was batteries for personal electronic devices, starting with camcorders and MP3 players and subsequently smartphones. “The West was happy to offshore a lot of these industries to China. It’s only now with the rise of the EV that we’re realizing it’s actually quite a fundamental part of our supply chain.”
In the West, the surge in demand for critical minerals and strong political backing has made financing easier to secure for firms looking to set up production domestically. Nonetheless, it’s hard to compete with Chinese producers, who hold a formidable advantage in terms of labor costs and economies of scale, having cornered multiple stages of the supply chain. “China’s vision is to have the whole supply chain and the final product, and it’s become quite competitive in large sections of it,” says Sanderson. Whereas other places like Quebec [which aims to be a key raw material supplier to North America] are just targeting raw material mining and processing and not battery manufacturing or EV manufacturing.”
Chinese companies dominate not just mineral processing, but also the downstream production of the goods into which those minerals end up. In 2021, six out of the ten largest wind turbine producers were Chinese, as were eight of the top ten solar panel manufacturers.2Page 43 And China accounted for over three-quarters of lithium-ion battery manufacturing capacity in 2020.3Page 13
Eliot Chen is a Toronto-based staff writer at The Wire. Previously, he was a researcher at the Center for Strategic and International Studies’ Human Rights Initiative and MacroPolo. @eliotcxchen
