The role of the state: how the US and the EU are trying to catch up with China in the lithium race
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From time to time, discussions arise in Ukraine about the role of the state in the economy. Nationalization of industrial enterprises and banks, the need for deregulation, stimulation of industries that export products and services fuel these discussions.
Lithium is no exception. Representatives of the highest government echelons are publicly discussing how best to manage the deposits of valuable mineral resources that Ukraine possesses.
The final format of cooperation between business and the state does not yet exist, but it seems that we cannot do without it completely. Because even the much stronger and more developed economies of the USA and the European Union have already announced state support for the industry.
They missed out on China’s technological leap and are now forced to stimulate the development of their own “green technology” manufacturers to close the gap.
What is the situation today and in the future
Global demand for lithium and lithium materials is increasing annually. Automobile companies are developing new model lines of electric cars. And battery manufacturers offer progressive solutions that increase mileage on a single charge and charging speed.
Where to start the development of lithium deposits in Ukraine and why it is important
This improves the attractiveness of electric transport and increases the demand for it. A closed circle arises: greater demand means greater need.
However, most of the technologies for electric cars and the global production of lithium-containing products are controlled by one country – the People’s Republic of China. According to Benchmark Mineral Intelligence, Chinese companies mine only 14% of the world’s lithium.
But in the following production stages, China’s dominance becomes phenomenal: 59% of the world’s production of lithium carbonate and hydroxide, more than 90% of cathodes and anodes, and almost 80% of the production of finished lithium-ion batteries. And this is without taking into account enterprises that are being built in other parts of the world using Chinese technologies.
The demand for batteries for electric vehicles is expected to grow at a breakneck pace in the coming years. The figure for 2030 will exceed last year’s sales by approximately 5 times.
To ensure this level of consumption, huge investments in new gigafactories for the production of batteries, mining and beneficiation of mineral raw materials are required. By 2030, Benchmark Mineral Intelligence estimates that this will require just over $920 billion.
But even such superpowers will only slightly increase the share of European and American battery manufacturers. It is expected to exceed 30% in 2033, compared to around 10% in 2023.
But the most interesting thing is that even in order to achieve such an indicator, the intervention of the European and American state apparatus will be required. Frankly speaking, China’s dominance would also not be possible without the Chinese government stimulating the development of this sector of the economy. It seems that the US and the EU will follow this experience.
What the US and the EU offer
The Americans were the first to respond to the need for change. Last August, the federal Inflation Reduction Act (IRA) was passed there. One of the key provisions of the document is to stimulate the development of ecologically clean energy by approximately 370 billion US dollars.
In particular, we are talking about tax compensations for the purchase of electric cars, which amount to several thousand dollars.
US citizens are already more likely to buy electric cars, despite the persistent stereotype about their love for big voracious pickup trucks and SUVs on gasoline and diesel. It is expected that thanks to this law, already in 2030, the share of electric cars in annual sales will reach 41%. As a result, American automakers are already investing billions of dollars in new plants.
According to analytical companies, it was after the adoption of the Inflation Reduction Act in the USA that the number of announcements about the construction of new factories for the production of batteries for electric cars increased sharply, which allowed American projects to almost catch up with the European market in terms of the number and capacity of new enterprises.
It seems that the aggressive American policy pushed the conservative European Union to action. The European bureaucracy, which unites several dozen countries, usually takes more time to think. But in March of this year, the president of the European Commission, Ursula von der Leyen, said: “The race is on!”
She made this statement a day before the presentation of the Net-Zero Industry Act and the Critical Raw Materials Act. They aim to stimulate the production and implementation of clean technologies in the EU and to ensure stable supplies of rare earth elements necessary to support the green transition.
These are still plans. But they will become part of the sectoral plan of the European Green Deal, developed precisely in response to American subsidies to manufacturers of environmentally friendly technologies. “We have to come together if we want to remain leaders,” von der Leyen said. Because thanks to the benefits within the framework of the IRA, European car concerns began to prefer investments in the USA, rather than in the domestic market.
Such actions of the American government and the plans of the EC demonstrate that it is the state policy that will play a key role in stimulating the development of “green energy”, increasing the demand for electric vehicles, components and raw materials for them.
Here it is worth mentioning that lithium is already on the list of raw materials that are critically important for the European Union. The development of green technologies is practically impossible without this metal. Fortunately for Ukraine, we have huge deposits of lithium-bearing ores, which the EU lacks.
Therefore, Ukraine can take advantage of its geographical and political proximity to Europe and become a supplier of lithium for European automakers.
Does the Ukrainian state apparatus need to do something else? It seems that for now it is enough to implement European norms, ensure the rule of law and conduct a real fight against corruption.
After the end of the war, it will make it much easier to attract European, American or Asian investments, thanks to which Ukraine and Ukrainian lithium will be integrated into the global production chains of high-tech products.
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