Key Points
- China is accused of “predatory pricing” by flooding the lithium market to eliminate global competition.
- Lithium prices have fallen over 80% due to China’s overproduction and decreased EV demand.
- The price collapse affects global lithium producers, including China, where major companies like CATL have halted production.
- Portugal, Europe’s largest lithium producer, struggles to attract investment amid falling prices.
Chinese lithium producers are intentionally flooding the global market with excessive supply, leading to a steep drop in prices as part of a “predatory” strategy aimed at eliminating competition, according to Jose Fernandez, Under Secretary for Economic Growth, Energy, and the Environment at the U.S. Department of State. Fernandez commented during a visit to Portugal, a country rich in lithium reserves.
During a briefing on Monday, Fernandez pointed out that China is producing far more lithium than is currently needed worldwide, resulting in a significant price decline. He emphasized that China’s “predatory pricing” drives out competition by lowering lithium prices to unsustainable levels for other producers.
China, which accounts for about two-thirds of the world’s lithium chemical output used in electric vehicle (EV) batteries, has caused lithium prices to plummet more than 80% over the past year. The price crash is attributed to China’s overproduction and reduced global demand for electric vehicles.
However, the collapse of prices is also affecting global competitors. It has also forced Chinese companies like CATL, a leading battery producer, to halt production at certain lithium mines. Fernandez warned that China’s low-price strategy constrains efforts by other countries, including the U.S. and Europe, to diversify their supply chains for critical materials like lithium.
The drop in the price of lithium has impacted Europe, which aims to reduce its dependence on Chinese imports. Portugal, which holds around 60,000 tons of known lithium reserves and is Europe’s largest producer, has been hit particularly hard as it struggles to attract the necessary investment for lithium projects. Falling prices have caused many global producers to scale back production and cut jobs.
Portugal and neighboring Spain aim to capitalize on their lithium reserves to build a full value chain for battery production, from mining and refining to battery manufacturing and recycling. Several Portuguese companies seek financing and partnerships to proceed with lithium extraction projects. Fernandez expressed support for these efforts, stating that the U.S. will assist companies navigating this challenging period of “predatory pricing.”
Trade tensions between China, the U.S., and the EU have escalated. The European Union is moving forward with plans to impose hefty tariffs on Chinese-made electric vehicles in response to what it sees as unfair subsidies. In retaliation, China imposed temporary anti-dumping measures on EU brandy imports.