By admin 
China’s Lithium City Is a Front Line of the Battery Trade War
Beijing wants a high-tech economy built on domestic supply, even if it comes at a cost.
The growl of extractors echoes across the vast mountaintop mines of Yichun in central China. A procession of heavy-duty trucks rolls down the valley to waiting refineries, where shipments of gray ore are processed into a battery material vital to the world’s energy transition — lithium.
The surging popularity of electric vehicles has transformed this once threadbare area into the country’s lithium mining capital. But the incessant grind feeding the world’s leading battery industry masks the reality that very few of those operating here are making a profit.
Since the metal’s peak in 2022, when migrants flocked to this city and even local ceramics factories turned their hand to the world’s lightest metal, the benchmark price has plummeted nearly 90%. The collapse forced miners from Australia to Chile to cut back in order to protect margins. The fall hit even harder in Yichun. Yet the digging continues, in a relentless push for self-reliance, a goal that’s only grown in importance with the return of US President Donald Trump and the start of a global trade war.
This unassuming spot, surrounded by mineral-rich hills and forests, is now on the front line of President Xi Jinping’s push to build a fortress economy — one that relies less on Western imports and more on its own resources and technologies. Such autonomy can help China’s companies like top battery maker Contemporary Amperex Technology Co. Ltd. secure stable access to lithium, and supports a wider effort to boost the country’s new-energy sector and domestic growth. But it’s come at a hefty financial and environmental price.
The lithium-bearing mineral here is lepidolite — abundant, but also extremely low grade, containing only a small amount of metal. Refining it is expensive, energy intensive and creates a large amount of waste, which can be toxic. For China, that’s the acceptable cost of staying ahead in the global race for key minerals.
“Lepidolite’s economics just don’t make sense — but it could help China to achieve self-sufficiency,” said Chris Williams, analyst at consultancy Adamas Intelligence. “China has to make lepidolite work, even if it’s not the best or cheapest deposit.”
A dominant force in batteries and EV manufacturing, China is also the undisputed leader in critical minerals refining, a position it’s used to retaliate against Trump’s tariffs. Strategic concerns have preoccupied Beijing for decades, well before the US and other Western nations began fretting about access to key metals and the fragility of industrial supply chains.
But China isn’t always rich in the underlying raw materials. When it comes to lithium, the country has modest reserves and relies on imports from top producers Australia and Chile. Addressing that vulnerability is crucial for Beijing’s ambitions on the world stage and to its efforts to replace old-school manufacturing with more valuable, high-end sectors including batteries, especially in poorer hinterlands like this one.
The concern is heightened on all sides as geopolitical tensions rise, increasing overseas governments’ anxiety over Chinese ownership of deposits. As resource protectionism spreads, even nations like Chile, with a long history of mining partnerships, are demanding more control over mineral wealth, especially when it comes to metals like lithium.
That’s made Yichun’s low-grade lepidolite all the more attractive. Battery giants CATL and Gotion High-Tech Co. Ltd. built facilities in the city in the past few years, and the government has taken stakes in mining and battery partnerships.
Lithium’s slump took hold in 2023 as EV sales growth slowed and supply began to outpace demand. Yichun, with its population of nearly five million, hasn’t been immune. Chinese lepidolite assets have some of the highest production costs in the industry, according to CRU Group, and more than half of the output tracked by the consultancy is operating at a loss.
Government pressure to keep operating, though, has kept the wheels turning. One local mining executive, declining to be named due to the sensitivity off the issue, said that officials don’t necessarily offer cash incentives but have strongly encouraged them to remain open by giving advice on improved efficiency and lower-cost procurement.
Here in the heart of Jiangxi, historically one of China’s poorest provinces, lithium is a lifeline regardless. Yichun’s mayor earlier this year described the metal as a growth engine and said higher volumes, with the help of technology, were helping to offset the effect of low prices.
China’s overall lepidolite production, which has increased by around 20 times since 2020, is expected to double by the end of the decade, according to consultancy Benchmark Mineral Intelligence.
“What we’ve seen with Chinese producers is their higher willingness to withstand operating at a loss for a longer period of time in order to secure the raw materials,” said Adam Webb, who heads battery materials forecasting at Benchmark Mineral.
On the outskirts of Yichun, a refinery owned by CATL and cathode-materials manufacturer Jiangsu Lopal Tech Co. Ltd., still receives hundreds of truckloads every day. The ore is crushed and ground into fine sand, then dumped into piles inside a warehouse the size of an aircraft carrier before being doused in chemicals, blasted with heat and spun in centrifuges to create lithium carbonate that can then be used in batteries.
The refinery was briefly halted last year as the value of lepidolite crashed. But it’s now running at its highest-ever capacity, according to its official WeChat account.
Despite languishing prices, it plans to ramp up even further later this month.
Losses aren’t the only headache. Lepidolite’s low lithium content means it creates far more waste and is also more carbon intensive than processing other sources of the metal, particularly salt-rich brines.
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Ground Zero
During the boom years, miners were known to skirt regulations, and pollution was common, raising concerns about local agriculture and health. The mountains around Yichun feed a web of streams that help irrigate the surrounding area, which in springtime turns into blazing yellow fields of rapeseed blossoms. Crops also include soybeans, cabbage and onions.
Waste from the lithium refining process sometimes includes thallium, a heavy metal that can be lethal when consumed. In 2022, environmental authorities found abnormally high levels of it along the Jinjiang River. That same year, at least five refiners in the area were found to have discharged wastewater with excessive thallium.
Those signals have prompted greater scrutiny, including from provincial-level regulators and Yichun officials. The city’s government, which has forecast the industry will produce about 10 million tons of waste from lithium processing this year, has been sending teams to local factories to test underground water and waste management, in some cases as often as once a month, according to people familiar with the situation.
And yet, taking better care of waste has also meant higher storage and maintenance costs, eating further into margins. For the CATL and Lopal facility, that meant covering a huge area big enough for hundreds of swimming pools with black vinyl to store and treat their waste.
Local authorities are eager to preserve tax revenues and jobs amid a sputtering economy — and producers are doing what they can to shield even paper-thin profits. Some are boosting production at night to make use of cheaper electricity prices.
For many, these unrelenting pressures underline the benefits of owning multiple links in the supply chain, a route that EV maker BYD has followed, and which even Western companies like Tesla Inc. and General Motors Co. are beginning to take.
“For CATL, they can operate the mine even if it’s making a loss. They are fully integrated with processing facilities and battery-making business, so they would be profitable elsewhere in the supply chain,” said Webb at Benchmark Mineral.
Representatives of CATL, and government officials for Yichun city and Jiangxi province, did not respond to requests for comment. Lopal said in March that the market’s surplus could put refiners like itself under pressure.
But companies also have an eye on the future, with EV sales expected to rise significantly in the years ahead. The International Energy Agency forecasts global lithium demand will more than double by the end of the decade, compared to 2024 levels, suggesting that securing market share today may be worth the pain.
China, meanwhile, is leaving little to chance. Jiangxi is vital to the country’s lithium ambitions — and expected to become a top source of the metal — but it’s not the only bet. There are hard rock deposits in Xinjiang and Sichuan, and metal-rich brines in Qinghai. In January, the China Geological Survey of the Ministry of Natural Resources said its latest nationwide mineral exploration campaign identified over 10 million tons of additional resources in the country.
The government is scouring for assets in Africa, where Beijing’s miners have long thrived. And it’s trying to extract more lithium from other sources, like alumina, the primary raw material used to produce aluminum.
Ambitions for Chinese production — and Yichun — will not fade, even with price declines, tight margins and a lull in a US-China trade war. The country’s reliance on imported raw materials remains uncomfortably high for Beijing, and resource security is a priority, said Marina Zhang, associate professor at the University of Technology Sydney. Innovation, meanwhile, may at least help improve dismal margins.
“This is a critical time for China to enhance its lithium self-sufficiency,” Zhang said, adding that it wasn’t just an economic concern. “It has become a strategic imperative — to safeguard the resilience of China’s clean-energy supply chain.”