Only ten months ago, François-Philippe Champagne, Canada’s minister of
industry, approved Zijin Mining Group’s purchase of Canadian miner Neo
Lithium on behalf of the Chinese government. Champagne dismissed
worries about national security and reassured critics that Neo Lithium is “truly
not a Canadian firm” by mentioning the company’s holdings in Argentina.
Chinese miners could have seen the agreement as a favourable indication
that allowed them to continue buying Canadian minerals unhindered. Their
joy would prove to be fleeting.
In a shocking turn of events, Ottawa declared on October 28 that acquisitions
pursued by foreign state-owned companies in Canada’s crucial minerals
industry would henceforth “be allowed on an exceptional basis.”
Three Chinese companies were ordered by Champagne to sell their holdings
in three Canadian lithium mines, including two that are located in Argentina,
a week later.
The sudden action reflects a negative attitude toward Chinese mining
investment. It hasn’t always been like that. For years, Western nations have
neglected the effects that crucial raw resources have on national security,
handing over enormous mineral riches to China just as the green revolution
was getting started.
In 2013, Tianqi Lithium outbid its American opponent and acquired the
Australian Greenbushes mine, which contains the highest quality lithium
resources in the world. This acquisition was made possible by funding from
the China Development Bank.
Under the direction of the then-President Sebastián Piera, who sought to
increase private investment in the mining industry, the same company later
purchased a 24 percent share in SQM, Chile’s largest lithium producer, in
2018. Without raising any red flags during the Obama or Trump
administrations, a Chinese business acquired two of the largest cobalt mines
in the world from the American corporation Freeport-McMoran in the
Democratic Republic of the Congo.
Such carelessness has allowed China to control the supply of the minerals
required for EV batteries, which are essential for the transition to clean
energy and the battle against climate change. The West must transfer raw
resources to China for processing because it lacks the ability to refine.
China is anticipated to produce 74% of the world’s batteries in 2022, with
production in Europe and the US trailing behind at 16% and 7%, respectively.
As it became increasingly difficult to ignore China’s dominance in the global
battery industry, mineral security was once again brought to the attention of
Western governments.
The Russian strike on Ukraine has reaffirmed the worry about potential
supply chain disruptions. Ukraine, which produces almost half of the world’s
semiconductor-grade neon, has halted manufacturing of neon due to theconflict. In the meanwhile, Russia exports 15% of the world’s nickel and 21%
of the palladium, which are used in batteries and catalytic converters,
Concerns over potential penalties on Russian commodities in February
drove nickel prices to an 11-year high (the price has since fallen).
Dependence on Chinese resources is not only financially unattractive but
also jeopardises the West’s strategic independence given the geopolitical
competition between China and the West.
Governments have been pushed by these concerns to reconsider their
industrial policies, with the United States setting the standard. The Minerals
Security Partnership, which includes Australia, Canada, South Korea, Japan,
and other partners, was introduced by the State Department in June. In order
to lessen reliance on China and Russia for minerals, metals, and energy, it
is intended to strengthen the “friend shoring” of crucial resource supply
The Defense Production Act’s purview is being widened by Congress to
include support for “the technical and industrial bases of” Canada, Australia,
and the United Kingdom.
The Critical Raw Materials Act was implemented in September by the EU,
which also rejected the conventional wisdom of free trade. Champagne
echoed a notion that is common throughout democracies when he defended
the divestment by saying that Canada preferred “foreign direct investments
from partners that share our interests and values.”
Despite the high rhetoric, each nation will experience decoupling at a
different rate. Consider Australia, which has historically provided China with
lithium and iron ore.
In 2021, following the diplomatic conflict over the origins of COVID-19, the
value of Chinese investment in Australia plummeted by 69 percent,
according to research by the University of Sydney and the consulting firm
KPMG. By increasing its mineral exports to Vietnam, South Korea, and
Japan while decreasing its mineral exports to China, Australia has also
diversified its international trading relationships. However, Australia hasn’t
been able to completely reverse Chinese investments. The resources
minister of that country declined to demand that China sell its stake in lithium
mines at the International Mining and Resources Conference last week,
saying that the projects “will continue as they are.”
In the hunt for essential minerals, the West has a fair opportunity to overtake
China. China owes its competitive advantage to a range of official
assistance, including subsidies for domestic processing facilities and policy
bank funding for buyouts overseas. The United States and Europe provide
their investors with equal access to financing and enable their firms to grow
fast by combining industrial policy and investment screening. That
represents a positive beginning step.

Leave a Reply

Your email address will not be published. Required fields are marked *