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China Expands Focus on Latin America and Africa in Race for Critical Minerals

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China Expands Focus on Latin America and Africa in Race for Critical Minerals

A recent report by S&P Global reveals that China is intensifying its efforts to secure critical minerals, with a particular focus on Latin America and Africa. These minerals, which are essential for industries such as electric vehicles (EVs) and renewable energy, are becoming increasingly important due to factors like top-line growth, supply security, and cost control.

China Takes the Lead in Lithium M&A

While other countries, including the United States, recognize the significance of these minerals, China has been the most active in pursuing strategic acquisitions. Chinese firms have been involved in numerous mergers and acquisitions, especially in the lithium sector, as demonstrated by the increase in acquisitions of lithium assets since 2021.

Lithium producers like Ganfeng and Tianqi are seeking to secure raw materials for their core business expansion, while metal miners like Zijin are entering the lithium market to diversify their exposure and benefit from future growth potential. S&P Global predicts that the interest in these minerals will persist, and acquisitions will continue as companies across various industries prioritize supply security and manage cost volatility.

Besides lithium, Chinese upstream and midstream firms are also investing in nickel and cobalt, with a focus on Indonesia and Australia.

Vertical Integration of Battery Makers & OEMs

In addition to strategic acquisitions, China’s battery makers are engaging in vertical integration by expanding into the upstream mining sector. As the penetration rate of EVs in China has risen, battery makers have faced significant supply shortages and escalating material costs. To manage costs and secure stable supply, battery makers are establishing stronger ties with upstream players, both domestically and internationally.

Leading Chinese auto OEMs, like BYD, are also venturing upstream in pursuit of backward integration. These companies are acquiring minority stakes or forming joint ventures with lithium miners and refiners.

Shifting Investment Focus

Initially, Australia was the preferred investment destination for Chinese firms due to its significant lithium production. However, foreign investment restrictions and challenges have led Chinese investors to explore emerging markets, especially in Latin America and Africa.

Zijin, for example, has acquired controlling interests in projects in China and Argentina. Ganfeng is expanding its presence in Argentina, China, Mali, and Mexico. BYD plans to invest in lithium projects in Chile, Argentina, and Africa. CATL is leading a consortium to invest in Bolivia for lithium extraction plants. China’s rapid investment in Africa, often in conjunction with infrastructure development projects, has been particularly notable.

China’s Expanding Control over Critical Minerals

The S&P report highlights that China’s control over critical minerals is expected to deepen and broaden. China has already achieved significant market positions in rare earths, mining 60%, refining 91%, and producing 94% of magnets globally. A similar trend is unfolding in the nickel market, with Chinese firms investing billions of dollars in Indonesia’s nickel supply chain.

These findings align with a study from Fudan University in Shanghai, which predicts that China’s overseas metals and mining investments in 2023 could surpass the previous record set in 2018.