U.S. Official Accuses China of Oversupplying Lithium to Eliminate Rivals with ‘Predatory’ Pricing

U.S. Under-Secretary for Economic Growth, Energy, and the Environment Jose Fernandez on Monday accused China of over-producing lithium in a predatory scheme to push down market prices and drive competing suppliers out of business.

“That is an intentional response by the People’s Republic of China to what we are trying to do,” Fernandez said. “They engage in predatory pricing … lower the price until competition disappears. That is what is happening.”

The U.S. government is sinking billions of dollars into lithium production with high hopes for huge deposits discovered in Nevada and California. Much of the funding comes from the “Inflation Reduction Act,” which President Joe Biden recently admitted was actually a disguised spending program for green energy development, falsely presented to the American public as an attempt to reduce high inflation.

Ironically, some of these lavishly subsidized efforts to produce more lithium for electric vehicle (EV) batteries have been stymied by environmentalists, who object to digging new mines or expanding existing projects. 

Fernandez made his remarks during a trip to Portugal, which is also hoping to increase production by tapping into a “gold mine” of lithium — and also running into trouble with environmentalists, who say the proposed Barroso Hills mining project would contaminate the water supply, erode the soil, and damage agricultural production.

China, which is not particularly concerned with the opinion of environmental activists about its mining and industrial operations, currently dominates the market by producing two-thirds of the world’s lithium.

The Chinese have indeed been able to use their production dominance to suppress global prices, as Fernandez charged. Lithium prices have dropped by 80 percent over the past year. Part of this decrease was directly attributable to Chinese overproduction, although weakening demand for EVs also played a role.

Fernandez said Portuguese mining companies have been having trouble securing investment and customer commitments because China drove worldwide prices down.

“We want to help them, and we think we can,” he said. “Lithium mining companies, everywhere, have to survive this difficult phase that was created by predatory pricing.”

Industry analysts expect the lithium oversupply situation to last through 2028, at which time supply might harmonize with much lower-than-expected demand for EV batteries. China’s own demand for EVs has diminished as well, which is one reason why the frantic lithium production boom of the past few years left the Chinese with an excessive inventory.

The Chinese government generally denies accusations of deliberate oversupply and predatory pricing, but on Wednesday the Chinese Ministry of Industry and Information Technology made the first guarded admission that too much lithium might be flooding the market.

China’s solution to the problem was a proposal that would restrict new lithium-ion factory construction, prohibiting factories that “simply expand production capacity.” Since China is already the dominant producer, this proposal would have the net effect of locking upstart competitors out of the market and cementing China’s position as king of lithium.

The International Energy Agency estimated on Monday that with billions of dollars invested, the U.S. and European Union could triple their share of the lithium market by the end of this decade — leaving each with about 15 percent, while China retains 60 percent.