China’s Battery Factories May Sit Atop Lithium Resources |

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Irina Slav has been writing about global energy markets since 2007, covering the oil and gas industry, energy security, commodities, and the…

The world’s largest battery maker and user, the country that dominates all alternative energy technology, is about to find out whether it could also boost its already dominant presence in a critical battery metal: lithium. China, according to a new study, could have significant, untapped resources of lithium right underneath its battery factories.

The possibility was detailed in a recent study that argued lithium deposits resulting from ancient volcanic activity could be located in East and South China, where most of the country’s battery factories were built. Ancient volcanoes produced so-called volcanic clay, which over time mineralized with lithium. Researchers have already found evidence of lithium mineralization in clay layers of volcanic rock.

As one of the researchers put it in an interview with the South China Morning Post, “potential targets for clay-type lithium deposits in southeastern China overlap with lithium battery industrial clusters in East and South China”. If proved viable, “Local supplies could significantly reduce transport costs and supply-chain risks,” Duan Zheng from the Chinese Academy of Sciences also said.

China controls between 70% and 80% of the global lithium supply chain, but it is not the world’s biggest producer of the metal. It is, however, the second-biggest, right after Australia. China is also the undisputed leader in lithium processing, with other countries only recently realizing their mistake in outsourcing their battery business to China, making themselves dependent on it in an increasingly fractured geopolitical canvas. Related: UBS Sees $110 Brent by Year-End as Gulf Flows Stay Below Prewar Levels

The possibility that China has even more domestic lithium resources it could develop would reduce its own dependence on foreign lithium—leaving more of it for battery hopefuls in North America and Europe. However, that possibility has yet to be proven. As with so much news about battery space, many potentially groundbreaking developments never leave the lab or, as in this case, the academy of sciences.

The issue with the newly discovered potential resources is their concentration. At between a few hundred parts per million and 1,000 parts per million, the concentration of lithium in those clay-rich formations the researchers studied is not really anything to write home about. Of course, commercial viability depends on demand projections, and even such low concentrations could potentially become viable, but not until China solves its battery-making-overcapacity.

This is a familiar problem for the country that has spent more than a decade subsidizing heavily everything that falls in the “New Energy” category, including solar panels, wind turbines, EVs, and batteries, both for the EVs and for storage. Thanks to these years of generous subsidies, companies in those industries grew without any consideration of overcapacity and its consequences. The Chinese government has already had to clamp down on EVs and solar panels, and now, it seems, it’s the turn of batteries.

This is an interesting development, given the bright outlook for battery storage demand driven by the booming IT sector thanks to the artificial intelligence race that is in turn leading to a boom in data center construction. Perhaps this effect would reach China’s battery industry later. For now, there are too many battery makers in the country. Not everyone agrees, however.

Already dominating the lithium-ion battery space, China now plans to become the dominant player in solid-state batteries within five years. “Over the next five years, the new-type battery industry is at a critical window for technological upgrading, and we must seize the strategic opportunities presented by technological and industrial innovation,” China’s Ministry of Industry and Information Technology said in a news release at the start of this month. Based on their track record with every other transition tech, the Chinese may just do that—and not bother with those new lithium deposits.

By Irina Slav for Oilprice.com

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