How China hopes to secure its supply chain for critical minerals

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When China announced back in July that it was restricting exports of germanium and gallium, it was a reminder of the leverage that China holds in the global supply chain for critical minerals, a group of 50 materials determined by the US government to be of high strategic importance.

These minerals are used in computer chips and precision weapons, but they are also important in clean tech, the technologies that will help the world transition to renewable energy to combat climate change. I recently talked to Seaver Wang, co-director of the climate and energy team at the Breakthrough Institute, a California-based environmental think tank that funds energy policy research, to understand more about the role critical minerals play.

Here are five big questions I asked Wang about China’s policies on critical minerals. The conversation has been lightly edited for length and clarity.

Does China depend on the global supply chain for critical minerals?

Wang: When we talk about China’s dominance of critical minerals, it’s really often at the processing stage. But China is importing raw ore to be processed.

The most important, interesting minerals from a clean-tech perspective are platinum group metals [that are used in technologies that turn hydrogen into power]. So metals like iridium, platinum, palladium, [and] zirconium are used in various fuel cell technologies and in the electrolyzers themselves. A huge amount of that production actually comes from South Africa.

And then cobalt—75% comes from the DRC [Democratic Republic of Congo]. High-purity quartz [which is used across the solar manufacturing sector and also for computer chips]—most of it comes from the US. An interesting one is actually thorium for nuclear [power plants], because China is experimenting with thorium-fueled fast reactors as part of the nuclear demonstration projects. And nickel—a heavy amount of it comes from Indonesia.

Does the Chinese government consider the fact it has to import lots of minerals a vulnerability?

Wang: China’s lead in developing novel battery technologies like sodium-ion batteries is because of efforts to ensure supply chain resiliency. A sodium-ion battery insulates you from the lithium supply chain uncertainty and from [that of] nickel and cobalt. A lot of the R&D efforts were heavily supported because they have supply chain advantages.

[Ultra-pure quartz] is actually one example where there’ve been a lot of joint public-private efforts to develop more ultra-pure quartz capacity in China. They’re investing in domestic production because that’s one sector where North America dominates current production. [Two American companies in North Carolina] produce like 180,000 tons of ultra-pure quartz a year; [Jiangsu Pacific Quartz Products, a Chinese company] is scaling up [its capacity] this year from 5,000 to 20,000 tons; and that’s basically all of the global production.

And interestingly, the US has no export restrictions on ultra-pure quartz to China, [but] China actually has an import tariff of 16% on US ultra-pure quartz because they want to encourage more domestic reliance.

Does China want to build a self-sufficient domestic clean-tech supply chain?

Wang: Whether it’s for the US or China, even though both are large countries, any fantasy of full self-sufficiency is clearly just a fantasy.

I think the smart policymakers in both countries are more thinking around being prepared for some decoupling or trade war, but they’re not trying to design industrial policy around a complete rupture. They are trying to [have] some domestic know-how, capacity, and other sources of supply so that if there was an export restriction on something, there would still be a price spike, and that industry might still go through some hard times but it would survive.

But the US and China are still regularly talking about how to collaborate on climate. Isn’t that inconsistent with the planning for decoupling?

Wang: Climate advocates and activists may have a slightly unrealistic expectation that both sides can pursue the Hollywood ending, where we all work together to fight the global challenge of climate change.

That is probably a little unrealistic because the US and China just genuinely, genuinely have so many policy areas where there are strong disagreements. And so I think we have to rather agree to disagree, and the best path forward would be to set good guardrails on competition.

I think many US policymakers are reluctant to be too muscular on clean tech, at least on the Democratic side, because they see US climate goals as being very tied to

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By: Zeyi Yang
Title: How China hopes to secure its supply chain for critical minerals
Sourced From:
Published Date: Wed, 13 Sep 2023 10:00:00 +0000

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