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Just as the supply chain crisis appears to be stabilizing, a new set of laws in southern Africa threatens one of the world’s essential commodities.
Last month, Zimbabwe banned the export of raw lithium. The material is a vital part of batteries that power everything from smartphones to electric vehicles. Zimbabwe is home to the world’s sixth-largest known lithium reserves and has long been an important source for the Chinese market, given the country’s close trade connections.
Probably not, but the events demonstrate how the global commodity market for everything from oil to semiconductors is changing. With new semiconductor manufacturing plants in the United States and the slow but steady de-dollarization of the international oil trade, the commodity trade is transforming quickly.
Zimbabwe’s move to protect local industry highlights how developing countries could try to protect their resources.
Lithium prices have surged more than 1,100 percent to record highs over the past two years. Lithium’s value will continue to increase as electric vehicles replace traditional combustion engines. Bloomberg reports that half of all car sales could be electric vehicles by 2030, up from just 9 percent last year.
Exporters that don’t process the ore locally will be required to show exceptional circumstances before moving the raw commodity out of the country.
The high price of lithium has recently attracted a slew of miners targeting abandoned mines in search of rock that might have some lithium. The rock is then exported to other countries. The new laws are designed to stop this activity as well.
Instead, the government is asking foreign powers to set up local manufacturing centers to get more of the increased revenue generated by processed lithium.
Local miners have applauded Zimbabwe’s approach, but the reality is that the country has a long way to go in manufacturing lithium on home soil.
According to Business Insider, Australia produced about half the world’s lithium in 2021, with Chile and Argentina’s output making a combined 30 percent of the total and China responsible for some 13 percent. Zimbabwe produces just 1 percent of global output, just behind Brazil.
The track record of other countries attempting this approach to resource nationalism isn’t great. Chile, home to the world’s largest known lithium reserves, has tried and failed to deepen its lithium manufacturing capacity over the last decade.
The big question in Zimbabwe’s decision will be how China reacts to the ban. In the past year alone, Chinese companies Zhejiang Huayou Cobalt, Sinomine Resource Group, and Chengxin Lithium Group have begun lithium projects in the country worth a combined $679 million.
Under the new laws, they will be required to build new infrastructure, like chemical conversion facilities, that can cost hundreds of millions of dollars.
Two companies – Huayou Cobalt and Chengxin – have started building processing plants in Zimbabwe that would exempt them from the export ban. This raises another question about Zimbabwe’s ultimate goals.
If the government forces these companies to open processing plants staffed by Chinese nationals, where is the value of the local economy? Would such a move end up generating much needed revenue for the country? Not really.
This will be incredibly profound in the manufacturing of semiconductors, confined mainly to Taiwan but will soon expand in deeper ways to the US and perhaps even Europe.
As developing nations continue to struggle with the strong US dollar and hawkish US Federal Reserve, we are bound to see more efforts to control raw materials vital to the economy, like lithium. Last year, the global economy braced for recession as cryptocurrency and technology stocks collapsed.
Don’t expect to see these changes overnight, but the seeds of transformation have been planted. It’s a matter of time before they blossom.
Joseph Dana is the former senior editor of Exponential View, a weekly newsletter about technology and its impact on society. He was also the editor-in-chief of emerge85, a lab exploring change in emerging markets and its global impact. He tweets @ibnezra
(This is an opinion piece and the views expressed above are the author’s own. The Quint neither endorses nor is responsible for the same. This article was published in an arrangement with Syndication Bureau.)
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