Nested in the picturesque region of Yichun in southern China, the Baishi Huashan lithium mine has become a bustling hub for the burgeoning electric vehicle battery industry.
As China strives to reduce its reliance on lithium imports, Yichun, known for its lithium-rich deposits, has emerged as a key player in the country’s quest for self-sufficiency.
With plans to quadruple its lithium carbonate equivalent (LCE) output to 350,000 metric tons by 2025, Yichun aims to match the production levels of leading lithium exporter Australia. However, the city faces challenges, including high production costs and environmental concerns, that cast doubt on its ability to achieve this ambitious target.
Yichun’s vulnerability is underscored by its significantly higher production costs compared to other Chinese mining regions. This makes it particularly susceptible to the recent global decline in lithium prices, raising doubts about its feasibility in meeting its production goals.
Moreover, the extraction of lithium ore from lepidolite, the rock containing the metal, has raised environmental concerns. In response to these issues, Yichun authorities have already shut down some plants, further complicating China’s pursuit of self-reliance in the lithium sector.
China’s determination to boost domestic lithium production stems from its heavy reliance on imports, with 55% of its lithium supply coming from foreign sources.
As global demand for lithium is projected to increase by 76% between 2022 and 2025, Beijing seeks to secure its own supply to support the growing electric vehicle industry.
Yichun, with its abundant lepidolite resources and favorable geographical location, has attracted significant investments from prominent battery companies such as CATL and Gotion High Tech.
To incentivize investment, the city has introduced various measures aimed at facilitating lithium carbonate production from lepidolite and other sources.
Yichun has provided support to mining companies by taking stakes in them, particularly those without overseas mines like Ganfeng Lithium and Tianqi Lithium.
This strategic approach has given Yichun an advantage over other lithium-rich regions, where development has lagged behind due to logistical challenges and limited production during harsh weather conditions.
However, Yichun’s cost disadvantage poses a significant hurdle. The process of extracting lithium from lepidolite can cost up to 100,000 yuan per metric ton, significantly higher than the costs associated with brine and spodumene extraction.
This cost disparity was manageable until lithium prices plummeted following the reduction of electric vehicle subsidies by Beijing. Analysts express concerns about the potential impact of higher costs, especially if lithium prices continue to decline, projecting a drop to 100,000 yuan per metric ton in the near future.
In addition to economic challenges, environmental damage has become an increasing concern in lepidolite extraction.
The process generates toxic by-products, including thallium and tantalum, leading to severe water pollution. Yichun authorities have already discovered the presence of toxic substances in the Jin River, heightening worries about the ecological impact of lithium production.
Comparatively, Eric Norris, president of Energy Storage at Albemarle Corp, the world’s leading lithium miner, highlighted that the processing methods used for lepidolite in China would not be permitted in the United States.
As Yichun navigates the obstacles of cost disadvantages and environmental concerns, its pursuit of becoming a major player in the lithium industry remains uncertain.
The city’s ambitious production goals must be weighed against the challenges posed by falling lithium prices, environmental repercussions, and the need to maintain economic viability.
Balancing these factors will be crucial for Yichun to sustain its position as a significant contributor to China’s lithium supply chain and the global electric vehicle revolution.
Despite the challenges faced by Yichun in its quest for self-sufficiency in lithium production, the city’s strategic location, abundant resources, and ongoing efforts to address environmental concerns position it as a key player in China’s long-term vision for a thriving domestic battery industry.
