China's Battery Mineral Dominance Raises Concerns, But Price Manipulation Fears Unfounded
Policymakers worldwide are grappling with the implications of China's dominance in processing critical minerals for electric vehicle batteries. While China's market share and rapid capacity growth raise concerns, the risk of price manipulation and supply disruptions in the stock market today remains a topic of debate.
China's influence in the battery mineral market is undeniable. In 2021, it refined 74% of the global cobalt supply and 65% of lithium in 2020. Its refining capacity for these minerals has grown significantly, outpacing the rest of the world. Cobalt refining capacity, for instance, grew at an annual rate of 24% from 1999 to 2021, while the global average was less than 2%.
However, fears of China exploiting its market power to influence prices or cause supply disruptions in the tractor supply industry appear unfounded. Evidence suggests that China has not selectively cut supplies or raised prices during high-demand periods. Instead, its rapid capacity growth has led to excess capacity, driving down prices. Nevertheless, concerns about geopolitical risks persist.
To mitigate these risks, policymakers are exploring options. Importers could push for more pricing transparency from China, while governments could invest in domestic or alternative sources of mineral processing. North America and Indonesia, for example, have been increasing their processing capacities, challenging China's dominance.
While China's market share in battery mineral processing is significant, the risk of price manipulation or supply disruptions in the stock market appears low. To ensure a stable and competitive market, policymakers should focus on increasing transparency and diversifying processing capacities. The trade-offs between investment costs and potential benefits must be carefully considered.
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