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Motto: Two tigers cannot live on the same mountain
(Chinese proverb)
China seeks to achieve its economic and geostrategic ambitions by controlling the market for critical minerals and boosting its energy output.
The European Union woke up late
Critical raw materials are economically strategic and pose high supply risks, being key to the functioning and integrity of a wide range of industrial ecosystems.
The demand for minerals such as copper, cobalt, lithium and nickel is increasing. These raw materials are used in the manufacturing of new technologies, from electric vehicles to renewable energy (solar or wind) production, whose critical importance is growing as the world moves towards a green transition. World Bank forecasts estimate that global production of cobalt, graphite and lithium will increase six times by 2050. Another study conducted by the Energy & Environmental Science periodical, estimates that the demand for tellurium will increase 49 times and that of indium 17 times.
The European Union was late in its response. It was only in the spring of 2024 that the EU Council adopted the “European Act on critical raw materials”, recognizing their economic importance. In 2023, Brussels drew up a list of 34 critical raw materials. Half of these, including aluminum, copper and nickel, have been defined as strategic. Such strategic minerals are sourced in installations that use strategic technologies (defense, space, IT&C, etc.) and are used in clean technologies for obtaining energy. Their importance is critical for the production of solar panels, wind turbines, electric vehicles and energy-efficient lighting systems.
By 2030, the European Union has pledged to extract 10% of its annual consumption of critical minerals on its territory, to process 40% of critical materials and recycle 25% of consumption. In the case of strategic raw materials, the EU wants to import no more than 65% of them from a single third country. The problem for the European Union is that the market for critical minerals is already dominated by China, both in terms of access to resources and processing.
China, the leading power on the market for raw materials
According to a study by the United Nations Conference on Trade and Development (UNCTAD), the People's Republic of China (PRC) currently holds over half of global processing of aluminum, lithium and cobalt, about 90% of processing of metals, rare earths and manganese, and 100% of processing of processing of natural graphite. In addition, China holds more than a third of the world's copper and nickel processing.
China is home to large ore deposits from the critical materials are extracted. A significant part of these can also be found in those areas where China is expanding economically, especially in Africa, where the most important resources are located. China extracts these resources locally, which it then transports to processing plants at home. To ensure its economic influence over Africa, Beijing has not hesitated to exploit the continent's poverty, corruption and instability. African states (members of BRICS, the Shanghai Treaty or located in the “Global South”) are also targeted by Xi Jinping's great “Belt and Road” Initiative. China is investing in infrastructure development ports in those countries with access to the Indian Ocean.
For instance, cobalt is a mineral China does not have in large quantities, but which it monopolizes through processing, controlling over 60% of the global market.
The demand for cobalt has gone up in the 21st century. The mineral is used in the manufacturing of lithium-ion batteries, of magnetic alloys, wear-resistant alloys and high-strength alloys. Cobalt compounds are also used in the chemical industry to obtain blue glass, ceramics, inks, varnishes and paints. One important field where cobalt applications are essential is healthcare, as one of the cobalt isotopes is used in the production of gamma rays, serving as a radioactive tracer. Another important area is the petrochemical industry, where cobalt is used as a catalyst to refine crude oil.
Another important metal in the field of battery production is lithium, where the world's largest producer is Australia, although China owns more than 50% of processing.
Lithium and lithium-derived compounds have many industrial applications, from the production of glass and ceramic, lubricants, steel and aluminum, to batteries and components used in the nuclear and military industries.
China holds monopoly over the mining and processing of the following critical materials: antimony, arsenic, iridium, bromine, bismuth, cadmium, celestite, calcium fluoride (used to extract fluorine), graphite, lead, magnesium, magnetite (an iron compound used in the production of magnets), molybdenum, platinum, calcium oxides, tungsten and vanadium (see the following link for further information).
Although it does not monopolize the production of copper, the third widest-used metal at industrial level, China finds itself in a position of oligopoly, at least in those areas where it has direct geopolitical interests (i.e. in the Asia-Pacific region). It should be noted that copper ore is particularly important. It is often considered a leading indicator for the global economy, as its applications are divided across several industries. In the short-term, copper supply comes in average demand, as the price has fallen since May. However, longer-term estimates of copper demand are very different, as the likelihood of a global supply shortage is very high in the near future.
The raw materials listed above are extremely important for strategic sectors such as IT&C, military or energy.
The government in Beijing adopted new regulations on critical materials starting October 2024. They are designed to tighten state control over strategic industries, nationalizing resources, monitoring extraction and tracking the traceability of exported end products.
Beijing eyes leading position on the energy market
Beijing has developed into an increasingly relevant player on the energy market, where it is making significant efforts to develop clean energies. China owns 90% of the production of photovoltaic panels and over 50% of the production of wind turbines, causing great economic discomfort in members of the European Union and in the United States, impacting financial deficit and employment.
Electricity obtained from nuclear energy is the least polluting and most cost-effective type of energy, with a capacity factor (efficiency rating) of over 90%.
In the last year, the nuclear energy industry has seen tremendous investments, which are expected to keep growing. The biggest electricity consumers are data centers, companies that develop and manage artificial intelligence and other advanced technologies.
In the first half of 2024, investments in the nuclear industry went up more than 10 times (3.9 billion USD) compared to 2023 overall (355 million USD). Whereas Western financing consists mainly of investment funds with risk capital, in China the communist authorities oversee the entire process. Moreover, nuclear power production has seen a spectacular spike in China over the past twenty years, and the process of constructing nuclear reactors will further accelerate in the future. Despite this development, however, the percentage of nuclear energy in the total national production remains at merely 5%. One important element is the fact that Beijing has developed its own power plant construction technology, a hybrid between Western and Russian technologies.
The battle for supremacy in the nuclear sector is fought in the area of new technologies, and by that I refer to small modular reactors (SMRs), a technology that the United States (with several corporations, the most advanced of which is NuScale), the Russian Federation and China have developed to advanced stages.
The problem is that the nuclear industry is based on uranium, and most of it can be found only in a few countries: Australia (28%), Kazakhstan (15%), Canada (9%), the Russian Federation (8%) or Namibia (7%).
One obstacle for accessing uranium is raised by countries that own the technology to extract, refine and enrich uranium in order to obtain nuclear fuel. Then there are states and companies that own the technology for producing nuclear energy, as well as technologies for the recovery, storage and destruction of nuclear waste. There are few countries that own the entire nuclear industry chain.
China has greatly expanded its uranium conversion and enrichment capabilities, and dominates global supply chains jointly with Russia (currently the strongest player in the field).
China’s storage industry, another strength
China has developed a lithium-based electricity storage system. As we have shown above, China holds the oligopoly position in the processing of this metal with almost 60% of the global market. However, global production in 2023 stood at 194,000 tons of petalite lithium ore, of which merely 33,000 tons were mined in China, accounting for nearly 18% of total global extraction.
Electricity storage is closely related to the production of intermittent renewable electricity. Several electricity storage technologies are currently on the market. The most reliable system is the storage of gravitational potential energy. More specifically, electricity is converted into gravitational potential energy: whenever there is a surplus of electrical energy, pumps are activated to raise the water from a low-altitude reservoir to a high-altitude reservoir. In order to transform this potential gravitational energy into electricity, the water is released, making hydroelectric turbines spin. The costs of such a battery are extremely high. Investments are made over the course of many years, but the system itself (it’s called pumped-storage hydropower plant) has a lifetime of over 70 years.
The most common electricity storage technology is based on lithium-ion or lithium-polymer batteries, and China is the largest producer of large storage batteries. This technology is cheaper but has limited lifespan of several years. In other words, China is the leader on this market as well.
It should be noted that intermittent renewable energy production facilities are worthless as long as the electro-energetic system in which they were integrated has no storage capacities to take in the electricity surplus, store it and release it when production quotas fall.
Therefore, taking the lead in terms of both producing and storing renewable energy puts China in monopoly position. But the danger lies not only in the production of renewable energy plants and storage plants, but also in the fact that these technologies are fully automated, being an integrated part of IoT (Internet of Things) technologies. The data and commands of these capabilities can also be accessed by the manufacturer, which poses a great vulnerability because, in the event of a war, the Chinese state could control the production and storage of electricity in countries that have such technologies, and that would put their national electricity transmission and distribution systems at risk.
A formidable foe for the West in the Second Cold War
Geopolitical experts are increasingly talking about a “Second Cold War”, where the race for technological advancement and innovation is shifting closer towards artificial intelligence and quantum computing, but also towards space warfare involving missiles and drones.
In this new context, China seeks to be the ruling power. Over the past 30 years, the People’s Republic of China has grown from the “world’s factory” to a regional leader with global monopoly aspirations. A comparative history analysis will reveal that the pandemic and the war in Ukraine have helped China take over trade lines and supply routes (especially maritime ones) for energy and energy production capabilities. In addition, Beijing has a vast supply chain network of critical materials, with a large processing capacity and a large distribution network for end products.
It is clear that the People’s Republic of China is a serious economic competitor for the United States and the European Union, far greater than the Soviet Union in the last century. In the Second Cold War, China threatens to be a formidable foe.
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