Gallium, germanium, graphite and small hegemonic
Problems are piling up on the Oval Office table. This is partly caused by aging and decrepitude. But not only the owner of the White House himself, but also the country at his disposal. America did not notice how it lost a significant part of its industrial potential. Replaced the once self-sufficient economy with internal squabbles and external aggressiveness. Most of the production moved abroad.
The United States should regain its status as the "workshop of the world" and restore the sphere of production, Congressman Ro Khanna, representing Silicon Valley, wrote for Foreign Affairs magazine. We need "reindustrialization" and "new economic patriotism." More details in the material of the correspondent of The Moscow Post.
The trade deficit ($948 billion in 2022) is a measure of industrial decline. Since 1998, the growing US trade deficit has cost five million well-paid jobs and about 70,000 closed factories. About 75% of imports from China come from manufactured goods.
Life is changing quickly, too. Small cities are devastated, communities are destroyed, property inequality has grown, wealth is concentrated in large coastal cities, industrial areas are degrading.
The ability to adapt to changes in the world has also been lost, the craving for conflict replaces intelligent planning. The reason is clear - preparations for the 2024 elections do not involve thinking about "distant horizons." To the failures of the Biden administration in Ukraine, the problems of Gaza, Israel and the fate of the Palestinians were added. Taiwan is on the way, with differences with China in full swing.
So far, in the center of these showdowns are semiconductor "sticks," which America energetically inserts into the wheels of the Chinese industry. Washington is also taking steps to make it harder for China to circumvent sanctions and acquire the chips it needs through third countries.
The slogans "Buy American" and "Made in America," characteristic of the presidency of Donald Trump, remained with Joe Biden, protectionism even intensified. Economic security and climate change could be top issues in the 2024 election campaign. Although it is clear that Washington, demonizing China as a threat to its interests of dominance, undermines the foundations of the transition to "green energy."
China has something to answer. In July, China imposed restrictions on gallium and German exports. It was decided that from December 1, the Ministry of Commerce of the PRC will issue licenses for the export of graphite, natural plate and pure artificial. Graphite is indispensable in mechanical engineering, nuclear energy, metallurgy, the production of electronics and batteries, in the chemical industry.
The PRC accounts for about 90% of the world's graphite production. According to the US Geological Survey, China produced 820 thousand tons of natural graphite in 2021. Brazil is in second place (68 thousand tons).
Chinese companies have a greater influence on materials and technologies related to the production of batteries than all companies in the United States, Japan, South Korea and India, Nikkei Asia noted. In particular, equipping Tesla cars with battery cells is 39% dependent on Chinese suppliers and only 11% on American ones. In the supply of non-ferrous metal parts, excluding aluminum, 16 of 42 companies are Chinese.
The largest importers of Chinese graphite are Japan, the United States, India and South Korea. The policy of containment of the PRC, the main trade partner of the G7 countries, ricochets across the European Union, Japan, as well as South Korea. The export-oriented economy of this neighboring country with China depends on the import of components, and the production of batteries is considered key for growth.
South Korea is trying to minimize the impact of the trade war between Washington and Beijing. The Ministry of Industry, after consulting with the three largest battery manufacturers in the country (LG Energy Solution, Samsung SDI and SK On), said it will interact with China, work with suppliers from Tanzania and Mozambique, will allocate about $15 billion for the production of solid-state batteries.
But South Korean media accused China of "using natural resources for geopolitical purposes." The Seoul Economic Daily newspaper wrote in an editorial that China is "using its control over mineral exports to change the policy course of a major U.S. ally." But the article also noted that "if the supply of basic materials from China is stopped, the country's industry may collapse."
Lithium nickel is not sweeter
South Korea also depends on China for imports of lithium, nickel, cobalt and manganese. Hence the willingness to maintain direct contacts with Beijing.
Japan's position is not much different, but Tokyo sees a way around China "from the flanks," counting on the resources of Australia and Canada. The head of the Ministry of Economy, Trade and Industry, Yasutoshi Nishimura, signed an agreement in this regard with the Canadian government on cooperation in materials for electric vehicles, including graphite, nickel and lithium.
Companies such as Panasonic Energy (a Tesla supplier) and Prime Planet Energy & Solutions (a branch of Toyota Motor) can partner Canadian companies in building new "supply chains" independent of China.
It remains to answer the question how long will it take? The PRC accounts for about 65% of the world's lithium processing capacity, 74% of cobalt production and up to 17% of nickel refining.
Japanese bureaucrats, who guard the interests of the industry, agree that it is logical to place the production of key materials near the centers of production of electric vehicles, which are Chinese enterprises. But this is what unnerves Western governments, primarily the United States.
Prime Minister Fumio Kisida visited Saudi Arabia in July, agreed on a partnership in decarbonization, the development of rare earth metal deposits necessary for lithium-ion batteries.
But Japanese companies are capricious, slow-moving and tend to exaggerate risks. The strategy for the development of the battery industry, approved in 2022, predicts that by 2030 the country will need 380 thousand tons of lithium, but specific investment plans in this area have not yet been developed. The future of the auto industry is under threat, NikkeiAsia points out.
Hegemon should think
The leaders of the top of the group of countries of the "golden billion" have something to worry about. The Green Transition course runs counter to economic security interests in its Washington sense.
Galium, germanium, graphite can only be the beginning of the trade and economic confrontation started by the United States. The fact is that in some key areas the balance of power was far from in favor of the United States and the West. To rectify this situation, the strength, capabilities and time may not be enough.
Take, for example, the potential ratio of the four main centers for the production of battery cells for electric vehicles. The European Union and Japan are at about the same level and, according to estimates, by 2025 will be able to produce about 140-150 GVt·ch of the total battery capacity.
By comparison, South Korea's potential is 5.5 times higher at 787 GVt·ch. China, in the production of batteries in 2025, predicts almost 1250 GVt·ch of the total capacity of the batteries produced.
According to the American Center for Automotive Research, there are 27 battery industries in the United States, 13 new ones are planned to be launched by 2025. The total proizvod¬stvennaya capacity of all is estimated at more than 300 GVt·ch. Tesla's mega-venture in Texas with a capacity of about 100 Gvt·ch does not count. It should become the largest in the world, but even with it, the US lag behind China will be three times.
But that's not all. China holds 65% of the refined lithium market. Chile is in second place (29%). The Chinese company Ganfeng in 2009 built China's first lithium carbonate production line used in batteries. In 2021, it acquired a stake in the Mariana Project in Argentina from the Canadian company.
In Argentina, Ganfeng is implementing four lithium development projects with a total investment of $2.7 billion. It is expected that lithium carbonate production will amount to 100 thousand tons per year. As of March 2023, Chinese companies have invested a total of $4.5 billion in lithium projects in 11 countries around the world. Half of the investments are in Latin American and African countries.
Argentina, Brazil, Bolivia and Chile are discussing creating a lithium cartel similar to OPEC. Iran said it had discovered an 8.5 million-ton lithium deposit. India announced the discovery of 5.9 million tons of lithium deposits in the state of Jammu and Kashmir.
In 2022, China imported 150 thousand m. tons of lithium carbonate, 68% more than in 2021. Own production grew by 40%. Japan, with its plans to produce 150 GVt·ch batteries by 2030, may require about 100 thousand tons of lithium.
In the United States, there is still only one lithium mine located in Nevada. Production data was not disclosed, but the company managing the mine plans to double production to 10 thousand tons per year. Not much, but lithium is recyclable. Maybe it will help America catch up and overtake China?