Overview
To gain supremacy in the microelectronics and next-gen power markets, China has invested upwards of $24 billion in lithium, cobalt, and nickel operations across the world. These investments in critical mineral mining and processing outside mainland China have increased both the flow of key materials to China and the dependency between China and its investee countries. In extreme cases like the Democratic Republic of the Congo (DRC), cobalt exports have increased by nearly 300,000 tons post-investment.
How should analysts and policymakers respond to these developments? Where is there opportunity for the US to establish stronger footholds in the critical minerals trade, and how should it pursue this goal? Which of China’s trade dependencies are resilient, and which are vulnerable to targeted disruption?
NSDPI researchers explore these questions in this paper building on the microelectronics supply chains analysis in our 00018 research and 00016 research. Going beyond trade data, this new study examines how China developed, maintains, and grows its critical mineral trade relationships. Because these trade deals involve substantial infrastructure investment, they have become highly-reliant relationships where the vast majority of Chinese lithium, cobalt, and nickel imports depend on a few invested countries rather than diverse suppliers. This presents strategic opportunities for the US to counter Chinese dominance where they have previously invested. In addition to identifying such opportunities, this paper offers policy recommendations to bolster US production of critical minerals.
Key Takeaways
- 80–95% of Chinese imports of key minerals come from countries like Chile, the DRC, Indonesia, and Myanmar, where China has made significant investments. In turn, China makes up the majority of these investee-nations’ exports of minerals like lithium, cobalt, and nickel.
- Because these investee-nations and China rely so heavily on each other for trade, all would be left extremely vulnerable if the trade flows of key materials were to be disrupted or cease. The DRC supplies nearly 95% of China’s cobalt, for example.
- The US should explore partnerships that could disrupt Chinese critical mineral investment abroad. For example, working with South Korean mining companies in Indonesia could offer Indonesia more favorable development terms while pushing them toward a US ally.
- Increasing lithium recycling in the United States has strong potential to reduce reliance on lithium mining and extraction while still shoring up domestic production. This would increase US resilience to supply chain disruption, but there are significant start-up costs to consider.