China has extended its dominance at home and abroad over critical minerals that are essential to future high-tech and renewable-energy industries. Amid intensifying geopolitical competition, Western countries are increasing their efforts to claw back market share while countries in the Global South, where many of these minerals are mined, are attempting to capitalize on growing global demand. A recent article on the subject by The Economist stated that in 2023 Chinese companies invested roughly $16 billion in foreign mines, the highest figure in a decade, up from less than $5 billion the year before. This month, Chinese companies have announced plans to invest billions of dollars in mines in Afghanistan, Ghana, Zambia, and the Philippines. Keith Bradsher at The New York Times reported that over the past few weeks, the Chinese government has enacted measures to increase its grip over the mining and refining of rare minerals within China by making it harder for foreign companies to purchase them:
As of Oct. 1, exporters must provide the authorities with detailed, step-by-step tracings of how shipments of rare earth metals are used in Western supply chains. That has given Beijing greater authority over which overseas companies receive scarce supplies.
China is also taking greater corporate ownership over the mining and production of the metals. In a deal that has received almost no attention outside the country, the last two foreign-owned rare earth refineries in China are being acquired by one of the three state-owned companies that already run the other refineries in China.
Beijing’s recent moves to take charge of the supply chain include other obscure chemical elements that are also needed by semiconductor manufacturers. On Sept. 15, China’s Ministry of Commerce restricted exports of antimony, a material used in semiconductors, military explosives and other weaponry. Last year, the ministry imposed export controls on two other chemical elements, gallium and germanium, also needed to make chips.
National security officials have tightened the flow of information about rare earths. They have labeled rare earth mining and refining as state secrets. Last month, the Ministry of State Security announced that two managers in the rare earths industry had been sentenced to 11 years in prison for leaking information to foreigners. [Source]
In September, a coalition of 14 Western countries and the European Commission formed the Minerals Security Partnership, a new financing network to support critical mineral projects and break China’s dominance over this sector. Despite initiatives like these, the U.S. has struggled to compete with China for critical minerals, for many reasons. One is that Chinese state-owned companies “have periodically flooded world markets with rare earths to drive down the price whenever Western producers try to ramp up production,” Bradsher wrote. Just this week, Chinese mining giant CMOC announced that it reached its full-year cobalt production target three months ahead of schedule. Eric Olander from the China-Global South Project argued that “CMOC’s strategy is unrelated to pricing conditions and more about keeping Western rivals on the sidelines [,…which] gives China an unrivaled advantage over its rivals in the U.S., Europe, and Asia that are moving aggressively to cut Chinese firms out of their supply chains — which, at least for cobalt, is not going to be possible for a very long time.” Eliot Chen at The Wire China wrote about how American policymakers are considering expanding the U.S. stockpile of critical minerals to compete with China, which has been “the master of the game” when it comes to leveraging its stockpiles:
“China’s stockpile has a dual purpose: one is defensive and the other is economic, to support domestic industry when prices get too high for downstream industries like the electricity sector, and then conversely when prices are too low and domestic producers like copper smelters have difficulty remaining profitable,” says [Gregory Wischer, principal at Dei Gratia Minerals, a critical minerals consultancy].
What, exactly, China stockpiles is not publicly known, and Chinese authorities are rarely transparent about when they buy up and sell down their stockpiles. But because of the country’s dominance over much of the critical mineral supply chain, even rumors of its intentions can produce wild swings in the price of metals. For example, while Chinese lithium producers account for less than 20 percent of mine production, China refines more than two-thirds of the metal. For other metals like graphite, which has vital defense applications, Chinese refiners control more than 90 percent of the market.
China’s outsized influence over the market, combined with its heavy investment in mining assets abroad, have helped it consolidate its control over global supply. An about-face by Chinese policymakers over electric vehicle subsidies in 2018, for example, resulted in a glut of lithium on the market. Chinese companies were then able to step in and acquire distressed lithium miners in Australia and Canada relatively cheaply. [Source]
China’s monopoly over various critical-mineral supply chains in Africa has motivated the U.S. government to increase engagement in the region. A major component of this U.S. strategy is the $4 billion Lobito Corridor project, which seeks to connect the Port of Lobito in Angola to Zambia and the Democratic Republic of Congo, thereby facilitating American and European access to cobalt and copper. But some local observers see selfish motives in this engagement. “This rivalry-driven approach narrows the scope for a partnership with Africa based on mutual benefit and long-term development. The continent, and the DRC in particular, should not be seen merely as a resource base to fuel external interests,” said Carlos Lopes, a professor at the Nelson Mandela School of Public Governance at the University of Cape Town in South Africa. He added, “Without a genuine commitment to local development, [the Lobito Corridor project] risks perpetuating Africa’s role as a supplier of raw materials rather than fostering economic transformation on the continent.” Analyzing China-Africa critical mineral cooperation in an article last month for the U.S. Institute of Peace, Cobus van Staden explored the potential for U.S.-China cooperation and described how African nations are looking to navigate both sets of relationships to their own benefit:
The second factor complicating the narrative of direct competition [between the U.S. and China in the region] is the drive from African countries to locate more strategic mineral refining and related manufacturing in Africa. African critical mineral strategies, developed by continental bodies like the African Development Bank, emphasize local refining and value addition, an ambition now enjoying official Chinese support, as well as support from the U.S. through initiatives such as the Minerals Security Partnership among others. For example, the partners involved in the Lobito Corridor have similarly signed agreements with African countries to do more refining locally. These include EU agreements with Zambia and the DRC for mineral-driven value addition, and a trilateral agreement between Zambia, the DRC and the U.S. for domestic electric vehicle supply chain development.
[…] FOCAC 2024 put these complications [including whether Western nations can expand their refining capacities at home despite the potential for environmental and community pushback] in stark relief because it highlighted an increased sense of synergy and coordination around green energy and critical mineral value addition in the China-Africa relationship. A similar focus is developing between the continent and its Western partners. The question now is whether the continent will be able to wield both sets of relationships to its own benefit, even as great-power tensions over critical minerals heat up. [Source]
