Loading the Elevenlabs Text to Speech AudioNative Player...
In recent discussions about the global lithium market, a significant shift has emerged that highlights the interplay between economic policies and market dynamics. At the center of this dialogue is the Inflation Reduction Act (IRA) of the United States, an extensive $400 billion initiative aimed at stimulating climate and energy investments. Experts are suggesting that the People’s Republic of China is responding strategically to this legislation by engaging in what some describe as “predatory pricing.” This approach involves artificially lowering prices to eliminate competition, particularly in the lithium sector, which is pivotal for battery technologies, including those for electric vehicles (EVs).
The Current State of Lithium Prices and Production
Over the past year, lithium prices have plummeted by over 80%. This drastic decrease has largely been attributed to China, which dominates the global lithium chemical production, accounting for approximately two-thirds of the total supply. The oversupply has led to significant price drops, creating a ripple effect across the industry. Notably, even major Chinese players like CATL, a leader in battery production, are feeling the impact, having to suspend operations at various lithium mines due to these challenges.
Impacts on Employment and Industry Diversification
The economic strain caused by the collapsing prices is not limited to China; it extends globally, impacting lithium producers in various regions. Europe, in particular, is eager to wean itself off dependence on Chinese lithium imports. Industry experts, such as Fernandez, have noted that the low lithium prices constrain the ability of countries like Portugal, which has significant lithium reserves, to attract much-needed investments for developing local industries. This raises concerns about job losses, as many lithium producers around the world are scaling back operations and laying off workers in response to the downturn.
Portugal’s Initiative in the Lithium Market
Portugal, recognized as Europe’s largest lithium producer, is well-positioned to expand its role in the lithium supply chain. The country has previously focused on lithium for ceramics but now seeks to diversify into full-scale lithium mining and battery production initiatives. Alongside Spain, Portugal is serious about utilizing its rich lithium deposits, aiming to create a comprehensive ecosystem that encompasses mining, refining, battery manufacturing, and recycling.
Numerous mining companies within Portugal are actively scouting for financing and partnerships to ramp up their operations. The goal is not only to survive the present challenges but to leverage their national resources effectively in a competitive global market.
Responses to Trade Tensions
Amidst these market fluctuations, international trade tensions have escalated. China’s Premier Li Qiang has recently countered allegations from the U.S. and Europe regarding unfair trade practices, particularly concerning subsidies that benefit Chinese firms in the realm of green technologies. These tensions are further compounded by the European Union’s plans to implement substantial tariffs on Chinese electric vehicles—an effort aimed at counteracting what it perceives as a form of economic aggression. In retaliation, China has announced temporary anti-dumping measures on certain imports from the EU, indicating a tightening of the trade Relationship.
Conclusion
As the global lithium market enters a precarious phase, countries must navigate these turbulent waters carefully. The interplay between strategic pricing, dependency on foreign resources, and the push for technological advancement highlights the complex nature of international trade and economic policy. For Portugal and other nations aiming to bolster their lithium industries, it will require not only innovation and strategic investments but also resilience in the face of fierce competition and shifting market dynamics. The race for lithium—essential for powering the green transition—will demand collaborative efforts, forward-thinking policies, and a keen understanding of global economic interdependencies.
China is oversupplying lithium to eliminate rivals, US official says
“That is an intentional response by the People’s Republic of China to what we are trying to do” with the Inflation Reduction Act – the largest climate and energy investment package in US history valued at over $400 billion, Fernandez said, adding:
“They engage in predatory pricing… (they) lower the price until competition disappears. That is what is happening.”
China accounts for about two-thirds of the world’s lithium chemical output, which is mainly used in battery technologies including for electric cars. Prices of lithium have fallen more than 80% in the past year largely due to overproduction from China and a drop in demand for electric vehicles.
However, the price collapse is also affecting China as it has forced Chinese companies like battery giant CATL to suspend production at certain mines.
Job cuts
Europe aims to reduce its dependence on imports from China and other countries of lithium and other materials essential to the green transition.
Fernandez said the low price “constrains our ability to diversify our supply chains on a broad, global scale” and also hurts countries such as Portugal that need investment to develop these industries.
Falling prices have forced many global lithium producers to scale back production and cut jobs.
Portugal, with some 60,000 tons of known reserves, is already Europe’s biggest producer of lithium, traditionally mined for ceramics.
Along with neighbouring Spain, the country wants to take advantage of local lithium deposits, aiming to cover the entire value chain from mining and refining to cell and battery manufacturing to battery recycling.
Several mining companies in Portugal have been looking for financing, customers and suppliers to crank up projects.
“We want to help them, and we think we can… lithium mining companies, everywhere, have to survive this difficult phase that was created by predatory pricing,” Fernandez said.
China’s Premier Li Qiang in June used his address at a World Economic Forum meeting in Dalian to hit back at accusations from the United States and EU that Chinese firms benefit from unfair subsidies and are poised to flood their markets with cheap green technologies.
Trade tensions intensified last Friday when the European Union said it would press ahead with hefty tariffs on China-made electric vehicles to counter what it sees as unfair Chinese subsidies, after a year-long anti-subsidy investigation. China on Tuesday imposed temporary anti-dumping measures on imports of brandy from the EU.
(By Sergio Goncalves; Editing by Andrei Khalip and Susan Fenton)
Keep Up to Date with the Most Important News
