Chinese lithium producers are saturating the global market with the essential metal, driving prices down in a “predatory” manner to outcompete other projects, a high-ranking US official stated during a visit to Portugal, a country with abundant lithium reserves.
From 6–8 October, Jose Fernandez, the Under-Secretary for Economic Growth, Energy and the Environment at the US Department of State, met with Portuguese officials from the Ministry of Economy and Ministry of the Presidency, as well as representatives from the Portuguese and US private sectors, including leading critical minerals, data centres and energy companies.
He reaffirmed US support for strengthening economic, critical minerals and energy cooperation in Portugal and Europe.
According to reports, Fernandez revealed during a briefing on Monday that China’s lithium production far exceeds current global demand.
“That is an intentional response by the People’s Republic of China to what we are trying to do,” with the Inflation Reduction Act (IRA), stated Fernandez. He added that the IRA is the biggest climate and energy investment plan in US history, worth more than $400bn, Reuters reported.
“They engage in predatory pricing… (they) lower the price until competition disappears. That is what is happening,” he said.
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By GlobalData
A response to US tariffs on EVs
Recently, the US has banned Chinese vehicle software and raised tariffs on Chinese electric vehicles (EVs). In August, the US quadrupled its tariff on Chinese EV imports to 100%.
Simon Price, market research company CRU’s director of Energy Transition, told Mining Technology that manufacturers have benefitted from “US policies, while Chinese manufacturers have been benefitting from increasing scale and reducing the cost of the supply chain”.
According to Price, in a world without tariffs and a purely free trade economy, the most cost-effective and superior product will prevail when attempting to maintain the competitiveness of your local product by transferring the expense to the consumer. Therefore, customers typically pay a lower price for a higher-quality product.
However, “in a world with tariffs, trade barriers and measures of raising the import costs, you are giving your domestic manufacturing a level playing field, but you are not enabling… the consumer base, to get their hands on that product. You are keeping it out of the hands of the lowest end of the market,” he added.
Price says that if the goal is to maximise EV sales and accelerate the energy transition, measures that raise the price to customers are “ineffective”. “So, we have to trade off the impact of higher costs on consumers against the potential benefits of domestic manufacturing.”
The impact on Europe
Price also believes that “there are impacts on Europe because the US has taken these measures with the IRA to support domestic manufacturing, [but] Europe hasn’t… To some extent, Europe and the UK have been caught in the crossfire.”
Europe is also working to decrease its reliance on imports from China and other nations for lithium and critical materials needed to shift to green energy.
Fernandez mentioned that the affordable cost “constrains our ability to diversify our supply chains on a broad, global scale”, and negatively impacts countries like Portugal that require investments to grow these sectors.
Falling prices have led global lithium producers to cut production and jobs. With 60,000 tonnes of reserves, Portugal is Europe’s top lithium producer. Traditionally mined for ceramics, Portugal and Spain aim to use local lithium deposits to cover the entire value chain from mining to battery recycling.
Most of the world’s lithium chemical output comes from China, which accounts for around two-thirds of the total. This lithium is primarily utilised in battery technologies, particularly for EVs. Over the past year, lithium prices have declined by more than 80% due to excessive production from China and decreased demand for electric cars.
