Benchmark Mineral Intelligence’s Henry Sanderson has warned Western nations to stay focused on critical minerals in order to challenge China’s dominance.
Sanderson, who is also the author of the book "Volt Rush", told the Tribeca Future Facing Commodities Conference in Singapore today that countries including Australia, Canada, Indonesia and Argentina had become very important to the energy transition.
“But at the heart of this transition is China and the US and the relationship between these two superpowers,” he said.
“In many senses, a lot of these other countries are trying to find their place in this new cold war between China and the US.”
Canada has moved to ban Chinese investment in its lithium sector.
“But countries like Indonesia, Argentina, Chile, they're much more open to Chinese investment and supply,” Sanderson said.
Early days
Sanderson said the energy transition was still in its early stages.
In 2023, battery demand was about 1 terawatt hour but is expected to reach 20Twh by 2050.
“And the implications on raw materials are really quite significant,” Sanderson said.
“With lithium, around 12 million tonnes, up from around 1 million tonnes at the moment.”
Benchmark’s rough calculation is that more than 300 new mines would be needed to meet demand by 2035.
Sanderson said there would be shortages of lithium, nickel and cobalt due to long lead times for mines.
“There’s a fundamental mismatch between the time it takes to develop mines and the other parts of the supply chain,” he said.
“In China, they can build chemical processing cathode and battery cell manufacturing in about a year, so they can really build these plants extremely quickly.
“But it's the mines that is the sort of limiting factor in terms of the time it takes to develop them.”
"Hostile world"
Sanderson said China was dominant on the processing side, cathode and anode production and battery cell production, but it was still quite reliant on imports for the raw materials.
“So if you think of China's perspective, they need to secure these raw materials outside their borders and they face an increasingly hostile world,” he said.
“As I said, Canada has stopped Chinese companies from investing in lithium and we're probably going to see more of the same, so they need these raw materials to feed the industrial sectors that provide the jobs and economic opportunity in China.
“So that's why we see Chinese investment in African and Argentinean lithium etc and also the development of domestic lithium within China.
“China is really thinking of energy security, as is Europe and the US.”
On the flipside, Sanderson said where the West was vulnerable was on the processing side and the cathode and anode side.
Sanderson said China had “excessive dominance” in rare earths and graphite.
“China's dominance is set to remain throughout this decade into the early part of next decade so I think if the West wants to de-risk, it should really focus on these areas where China's dominance is 90-plus percent,” he said.
US "back in the game"
Sanderson said the US Inflation Reduction Act was a significant piece of legislation.
“And what we see in the IRA is very protectionist measures and very, very similar to how China has developed this clean energy industry so it's like the US is trying to do a China,” he said.
Under the IRA, companies can receive grants or tax if critical minerals are mined or processed in the US.
“Foreign entities of concern cannot be involved in this supply chain – China being the most significant entity of concern,” Sanderson said.
But Sanderson pointed to the fact that Western companies like Albemarle Corporation and Arcadium Lithium could build downstream capacity in China for a 10th of the cost of the US.
“These IRA restrictions are coming in, but the costs are increasing for a lot of projects in the West. So how do we compete with China?”
Sanderson said innovation, hydropower and government subsidies could make the West more competitive.
But he warned it wasn’t as simple as it sounded.
“The Inflation Reduction Act caused a lot of backlash in Europe as a lot of investments that were going to be made in Europe have gone to the US, so there are tensions in this arrangement,” Sanderson said.
“If all these countries get together, there is enough to create new supply chains and really focus on the task.”
Sanderson said when it came to the energy transition, geopolitics was of high concern and were worth following closely.
“Because in Western democracies, we need to get buy-in from populations for this project of de-risking from China and building out the supply chains,” he said.
“Because China is so dominant, we're already seeing voices coming out against EVs, because they say it will lead us to reliance on China, so we're in a very dangerous area where, in the West, we need to maintain this vision and this strategy that we've embarked on.”
