Now, it is becoming more and more difficult to purchase global mineral resources. Because electric vehicles use more concentrated resources than traditional resources such as oil. The top 3 countries with lithium and cobalt reserves control around 80% of the world’s resources. Resource countries have begun to monopolize resources. Once countries such as Europe, the United States and Japan cannot ensure sufficient resources, their decarbonization goals may be met.
To promote the decarbonization process, it is necessary to continuously replace gasoline vehicles with new energy vehicles such as electric vehicles, and replace thermal power generation with renewable energy power generation. Products such as battery electrodes and engines cannot be separated from minerals. It is predicted that the demand for lithium will increase to 12.5 times of 2020 by 2040, and the demand for cobalt will also increase to 5.7 times. The greening of the energy supply chain will drive the growth of mineral demand.
Currently, all mineral prices are rising. Take lithium carbonate used in the manufacture of batteries as an example. As of late October, the Chinese transaction price as an industry indicator has risen to 190,000 yuan per ton. Compared with the beginning of August, it has increased by more than 2 times, refreshing the highest price in history. The main reason is the uneven distribution of production areas. Take lithium as an example. Australia, Chile, and China, which are among the top three, account for 88% of the global production share of lithium, while cobalt accounts for 77% of the global share of three countries including the Democratic Republic of Congo.
After long-term development of traditional resources, the production areas have become more and more scattered, and the combined share of the top 3 countries in oil and natural gas is less than 50% of the world’s total. But just as the decrease in the supply of natural gas in Russia has led to the rise in gas prices in Europe, the risk of supply constraints from traditional resources is also increasing. This is especially true for mineral resources with a higher concentration of production areas, which leads to the prominence of “resource nationalism”.
The Democratic Republic of Congo, which holds about 70% of cobalt production, seems to have begun discussions on revising development contracts signed with Chinese companies.
Chile is reviewing a bill on tax increases. At present, large mining companies expanding their business in the country are required to pay 27% corporate tax and special mining tax, and the actual tax rate is around 40%. Chile is now discussing a new tax of 3% of its value on mining minerals, and is considering introducing a tax rate mechanism linked to the price of copper. If realized, the actual tax rate may increase to around 80%.
The EU is also exploring ways to reduce its dependence on imports by developing regional resources and building recycling networks. Electric vehicle company Tesla acquired lithium deposits in Nevada.
Japan, which is scarce of resources, can hardly find a solution for domestic production. Whether it can cooperate with Europe and the United States to broaden procurement channels will become the key. After the COP26 held on October 31, the competition around greenhouse gas emission reduction has become more intense. If anyone encounters setbacks in resource procurement, it is really possible to be abandoned by the world.
Post time: Nov-19-2021