The rise of Chinese lithium

Published: Saturday, 24 September 2011

Ganfeng Lithium’s Wang Xiaoshen explores China’s expanding lithium industry, its reliance on spodumene imports and a government-backed move towards high value exports

China has long bucked many global economic and industrial trends. Lithium is no different. While the world in the mid-1990s became reliant on lower cost lithium derived from South American brine, China continued using spodumene concentrate as its primary source.

It is a trend that has not really changed and one totally at odds with global consumption patterns.

China’s lithium industry has been active since the 1950s, but only in the 1980s became significant following a rise in demand for consumer driven goods.

Lithium was sourced from a spodumene and lepidolite mine located in the northern part of Xinjiang and Jiangxi provinces. As the 1980s drew to a close, imported spodumene from Australia became the main raw material source for the Chinese lithium industry together with smaller quantities of spodumene from Sichuan province.

This situation was turned on its head in the mid-1990s when Chile’s SQM started to produce technical grade lithium carbonate priced below $2000/tonne. This hit most spodumene based lithium producers – chemical convertors – very hard and only a handful survived.

Today, owing to rapid market development of the lithium-ion battery and various pharmaceutical applications, some entrepreneurs have started to venture into the downstream lithium business.

In the meantime mothballed spod-umene mines have been restarted in addition to new brine operations following a lithium carbonate price rise to over the $4,000/tonne threshold.

Limited sources, downstream focus

Lithium brine production is mainly located in the remote Tibet and Qinghai provinces. Projects in East Tajinaier, Qinghai province and Zabuye, Tibet started as far back as the early 1990s before industry leaders SQM and FMC entered the marketplace.

These lithium projects fell far behind their original production targets however. Zabuye struggled with a lack of infrastructure and difficulty in operating at high attitudes. Qinghai’s lithium production was delayed due to challenges removing the high magnesium content.

Qinghai Lithium now has the ability to make good technical grade lithium carbonate from high magnesium-lithium ratio brine but only in limited quantities.

The majority of active spodumene mines are located in Sichuan province. The reserves in this region hold Li2O contents between 1-1.5% and are producing spodumene concentrate with Li2O levels of 5.5%. Most of the mines are owned by lithium chemical producers as a feedstock source. China has no independent spodumene supplier

A lepidolite mine located in Yichuan, Jiangxi province was used to supply raw material for producing lithium hydroxide in the late-1990s for the domestic ceramic industry.

China is now experiencing a new wave of lithium expansions in the wake of lithium-ion battery demand from portable electronics and the promise of an electric vehicle future.

China’s conventional end uses for lithium includes glass, ceramics, lithium-bromide absorption air-conditioners, aluminum smelting, steel casting protecting powder, and lubricant grease.

The country is experiencing growth in many of these areas particularly the glass industry, a trend which opposite to industry outside of Asia.

Lithium processing companies in this sector are: Tianqi Lithium, Xinjiang Lithium, Citic Guoan, and Zabuye. Ganfeng Lithium is the leading producer of lithium chloride in China.

Jiangxi province-based Ganfeng Lithium has established a leading position 

of producing lithium metal and derivative products, high purity lithium carbonate and lithium-fluoride for electrolyte production, and other specialties. The company was listed on Shenzhen Stock Exchange in August 2010 – the first pure lithium company to be listed in China.

Tianqi used to have the majority share of battery grade lithium carbonate in the domestic cathode market but now this is shared by Ganfeng Lithium and Pan Asia Lithium.

Both Ganfeng Lithium and Tianqi are importing raw material. Tianqi is 100% reliant on spodumene from Talison in Australia, although the company has announced an investment into a fully owned spodumene mine in Sichuan province and a holding in a pre-production project in Canada owned by Nemaska Exploration.

The company has increased its number raw material sourcesto include concentrated lithium brine, spodumene, lepidolite and recycled material. Theuse spodumene and lepidolite are the new measurements to increase the source of lithium.

 It has also started securing international raw materials sources through an investment in Argentine brine developer International Lithium Corp.

 China’s lithium industry is in a unique position and is unlike other major markets in Japan and South Korea. China has a large lithium chemical production capacity, which often exceeds domestic demand. This enables the country to cope with demand increases while remaining competitive.

 With a significant VAT barrier on imports and exports Chinese companies are reluctant to trade outside of its borders.

Australia’s Talison Lithium, the world’s leading spodumene miner, relies on the Chinese market as its business driver. An expected boom in demand resulted in an expansion of its Greenbushes mine to 320,000 tpa. A second phase expansion has also been approved which will take concentrate capacity to 720,000 tpa and make Talison Lithium the world’s largest lithium carbonate equivalent producer at 110,000 tpa.

Exporting higher value   

China is moving towards exports of higher value products across all industries. For example lithium battery exports enjoy a 17% tax refund whereas for basic lithium chemicals it is 0%, some products even have an export tax.

As a result Chinese exports of higher-value lithium chemicals will increase.

Consolidation in the industry will also become a rising trend. Small lithium companies in niche markets will merge with bigger lithium players, particularly those publically listed with financial clout.

With the high hopes for EV demand and energy storage, the lithium industry has attracted significant investment in recent years. The existing players will increase their capacities. Brine projects in Qinghai and Tibet will have a significant increase in output over the next 2-3 years.

Galaxy Resources will be producing battery-grade lithium carbonate at its Jiangsu chemical plant using spodumene concentrate source from its Mt Cattlin mine in Australia. This will be China’s first purpose build battery grade lithium plant. Production from new spodumene projects will also enter the market soon.

With the Chinese Government keen to support to new energy industries, China will maintain its growth status in lithium.

Wang Xiaoshen is vice chairman and vice president of Chinese lithium producer, Ganfeng Lithium