Officials from the United States and South Korea recently met to discuss the auto industry’s electrification — among other things — according to a report from the Financial Times. The two countries are trying to forge a better partnership in the interest of reaching their ambitious EV goals, but there’s an elephant in the room: China.
Well, there’s two elephants, because not only is the Chinese market the biggest in the world, but Chinese manufacturing is absolutely essential to every single EV market outside of China itself.
It’s not because EV manufacturing will be relegated overseas, but because even though the raw materials that electric vehicles require are sourced globally, China is the world’s biggest processor of these materials, per the FT:
Indonesia is the world’s biggest producer of nickel. The Democratic Republic of Congo is the source of more than two-thirds of all cobalt. More than half the world’s lithium comes from Australia, nearly a third of all copper comes from Chile.
China, however, is by far the biggest processor of each of these minerals. And when it comes to rare earth metals — inputs used in some electric vehicle motors, among countless electronic devices critical to modern technology — the country’s dominance is even deeper.
The International Energy Agency notes China’s share of processing rare earth elements — converting the rare earths from mined materials into oxides, metals and magnets used in batteries — stands at a staggering 90 per cent.
Meaning, you can jet-set and source all the raw materials you want, but you will still need someone to process the minerals and turn them into the components that power EVs, which is where China comes in.
This makes the IEA’s figure indeed staggering because it means that somewhere along the global supply chain, China will factor into the construction of nine out of ten electric cars.
It’s important to note, though — as the FT does out by citing The Australian — that China did not forcibly edge out competing labor markets for this near-monopoly on mineral processing.
The country saw the benefit in doing the dirty work that no one else wanted to do, and it invested in the sector early on, from the Financial Times:
As Ross Gregory and James Kruger, advisers to the critical materials sector, wrote last month in The Australian […], it is wrong to think China’s hegemony stemmed from “a nefarious plot . . . to hold the world ransom”.
“Rather, the West was happy to dump its ores and concentrates on China, leaving it to the Chinese to carry out the ugly processing techniques with high carbon output,” they said. “Unsurprisingly, China looked to the future, and supported this industry with cheap access to land and reagents, recognising a long-term strategic pay off.”
So, while many countries were happy to offload that work and let China sort out the emissions from it, China was busy betting on the need for this work in the age of the electric car.
The FT cited the IEA, which estimates “that to reach the targets of the Paris agreement the world needs to quadruple its output of minerals used in clean technologies over the next two decades.” Which seems to say that China’s bet paid off.
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