The recent announcement from China’s Ministry of Commerce is generating significant attention in the Western world. The export ban on LFP/LMFP materials, precursor compounds, and lithium extraction, refining, and processing technologies presents several challenges to the global battery value chain and ecosystem.
This development echoes the situation with rare earth elements, where China dominates with over 99.9% of production, exports, and decades of technological advancements. In the rare earth elements industry, China implemented restrictions allowing only the export of final products, such as magnets, rather than raw materials or technologies. This created a significant gap between China and the Western world in terms of technological know-how, market share, and economic advantages.
However, behind each challenge lies a potential opportunity for the Western ecosystem to accelerate projects aimed at establishing a localized supply chain. Starting with LFP and LMFP chemistries and precursor compounds, this could be an excellent opportunity for countries like Morocco and Saudi Arabia to leverage their expertise in phosphate rock processing for fertilizers and develop projects focused on producing battery-grade phosphoric acid. Similarly, manganese-rich countries like South Africa could expedite the implementation of manganese precursor refining plants.
In Europe and the USA, this situation calls for heavy investments in vertically integrating the supply chain by leveraging existing local technologies. Regarding lithium extraction, refining, and processing, Direct Lithium Extraction (DLE) technology does not depend entirely on Chinese players. It shares similarities with the Oil & Gas industry, making it feasible for Western players—particularly in the U.S. and South America—to adopt and advance these technologies.
Leveraging American and European expertise in refining and impurity removal equipment, which overlaps with chemical industry processes, can enable suppliers to expedite project development. We need to understand how this announcement will affect the overseas business development strategy of several players along the supply chain, including equipment and technology suppliers in material refining and processing. Will they take a step backward, re-evaluating local investments rather than overseas expansions, or will they find pathways to expand their operations overseas?
Nevertheless, technology is not the only critical factor in this complex puzzle. Cost competitiveness remains a major challenge. Relying solely on local suppliers, mineral resources, and technologies may not be sufficient to compete with Chinese players. A significant portion of cost advantages stems from economies of scale, which, if not developed immediately, may prevent Western players from ever achieving cost parity with China.
In conclusion, while the export restrictions imposed by China present substantial hurdles, they also serve as a wake-up call for Western nations to invest in building resilient, localized supply chains. By seizing this opportunity, countries and companies can strengthen their positions in the global battery market and reduce dependence on China for critical materials and technologies.