China’s Lithium Lock: How One Nation Controls the Battery Supply Chain Bottleneck

The Invisible Chokehold on the Electric Vehicle Revolution

From the streets of Berlin to the highways of California, the global soundscape of transportation is undergoing a fundamental transformation. Petrol engines are giving way to electric motors as governments worldwide push to decarbonize transport. Yet beneath this visible shift lies a less visible but far more consequential concentration of power. While the world focuses on which countries possess lithium reserves, the real battle for control of the electric vehicle future is being fought in chemical plants where raw minerals become battery-grade compounds.

China currently commands between 60 and 70 percent of global lithium chemical refining capacity, according to Benchmark Mineral Intelligence (BMI), a London-based price reporting agency specializing in battery supply chains. This dominance persists despite China ranking only ninth globally in actual lithium resources. The disparity reveals a critical vulnerability in the clean energy transition: owning mines does not equate to controlling the supply chain.

Luc Braun, a research analyst at BMI specializing in lithium and global hard rock mining, notes that China’s control is particularly absolute in hard rock conversion. “China thus completely dominates hard rock conversion capacity,” Braun told CNA. This concentration matters because refining represents the stage where costs are determined and supply reliability is established, making it the decisive bottleneck in the journey from raw earth to electric vehicle.

Why Refining Matters More Than Mining

The distinction between extracting lithium and preparing it for batteries represents one of the most misunderstood aspects of the energy transition. Global lithium supply originates primarily from two sources: hard rock spodumene mined largely in Australia and parts of Africa, and lithium-rich brine extracted from underground salt flats in South America’s “Lithium Triangle.”

In 2025, Australia accounted for approximately 31 percent of mined lithium production, followed by South America at 27 percent, China at 21 percent, and Africa at 19 percent, according to BMI data. Yet much of this raw material flows to China for transformation. “A mine gives you lithium-bearing rock or brine, but the battery supply chain runs on tight-spec lithium carbonate and lithium hydroxide,” explained Srinivas Popuri, a battery value chain expert who advises automakers and investors.

Popuri draws an analogy to the oil industry to illustrate the importance of this intermediate step. “Mining gives you crude oil. Refining gives you petrol and diesel that meet strict specifications and behave predictably in engines,” he said. “Lithium is similar. You take a relatively messy raw input and convert it into a purified chemical with tightly controlled impurities and consistent physical properties.” Even small variations in this process affect battery performance, yield, and lifespan, directly shaping costs and supply reliability for carmakers.

The technical complexity of this conversion cannot be overstated. Chemical conversion is energy intensive, technically demanding, and difficult to scale outside established industrial clusters. Chinese refining hubs benefit from an integrated ecosystem where equipment suppliers, engineers, chemical firms, and battery manufacturers operate side by side, driving down costs and accelerating production timelines in ways that isolated facilities elsewhere struggle to match.

Resource Rich, Processing Poor

The geographic mismatch between where lithium is found and where it becomes battery-ready creates structural dependencies that are difficult to unwind. While South American brine operations often produce chemical output, BMI’s Braun notes that “the vast majority of chemical output outside China comes from South American brine operations, which are typically integrated facilities,” meaning their output is tied to their own feedstock and unavailable for processing third-party material.

Even this South American production often requires additional processing. Roughly half of South American chemical output fails to meet battery-grade standards and requires further refining, frequently in China. Hard rock lithium follows a similar pattern at larger scale. China relies primarily on Australia and Africa for hard rock feedstock, shipping concentrated ore to Chinese chemical plants for conversion into lithium carbonate or lithium hydroxide.

Once upgraded to battery-grade standards, lithium feeds into a downstream chain equally concentrated in China. The country controls approximately 86 percent of global cathode active material production and 85 percent of battery cell manufacturing, according to BMI. This vertical integration allows batteries to move from chemical plants into vehicles rapidly, often within the same industrial clusters, creating efficiency advantages that Western supply chains cannot currently replicate.

The International Energy Agency’s 2025 Global Critical Minerals Outlook confirms this concentration is increasing rather than decreasing. Between 2020 and 2024, the geographic concentration of refining rose across nearly all critical minerals. For lithium specifically, the average market share of the top three refining nations climbed from around 82 percent in 2020 to 86 percent in 2024, with China driving most of this growth.

Price Volatility and Production Cuts

The refining chokepoint becomes most visible during market turbulence. Between 2021 and 2024, lithium prices experienced a spectacular boom and bust cycle that exposed the fragility of global supply chains. Prices surged eightfold during 2021 and 2022 as electric vehicle demand accelerated, then collapsed by over 80 percent by 2024, according to IEA data.

This volatility forced widespread production cuts across the industry. China’s largest battery maker, Contemporary Amperex Technology (CATL), scaled back lithium operations in Jiangxi province due to high production costs and soft prices. Jiangxi Jiuling Lithium suspended production at mining units, while Australian miners including Global Lithium Resources scaled back feasibility studies. Arcadium Lithium announced plans to place its Mt Cattlin spodumene operation in Australia into care and maintenance by mid-2025.

YJ Lee, director at Singapore-based Arcane Capital Advisors, describes the period between 2023 and 2025 as “a pretty painful lithium winter.” However, Lee notes that in the grand scheme of the energy transition, this downturn was brief. “What did happen was a lack of capital that caused many lithium developers to put a hold on their projects, delaying them by several years,” he explained. This investment freeze has consequences for future supply security, as projects delayed today become supply shortfalls tomorrow.

Lithium conversion carries significant environmental compliance costs that add to investment uncertainty. The process produces waste and residues requiring careful management, making permitting and waste treatment increasingly important components of project timelines and costs. “Only when upstream mine supply is stable can the industry chain develop normally,” noted a leading Chinese lithium producer who requested anonymity, adding that costs and process maturity across different stages affect both prices and supply quality.

When Export Bans Disrupt the Flow

The concentration of refining capacity in China creates structural vulnerability to supply shocks, particularly when resource-rich nations attempt to capture more value from their resources through export restrictions. On February 25, 2025, Zimbabwe announced an immediate suspension of all lithium concentrate exports, including shipments already in transit, sending shockwaves through Chinese industrial circles and triggering an overnight rally in lithium prices.

Zimbabwe, which accounts for roughly 10 percent of global mined lithium supply and approximately 15 percent of processed lithium in China, had originally planned the ban for January 2027 but accelerated the timeline to force domestic processing. “Instead of preparing for value addition, some actors engaged in a frenzy of mining activity, seeking to extract and export as much raw lithium as possible before the deadline,” noted Nick Mangwana of Zimbabwe’s information ministry, who denounced the resulting stockpiling as a “plunder” of the nation’s economic future.

The ban created what Business Insider Africa described as a “direct supply shock” for China, which depends heavily on imported hard rock spodumene concentrate from Africa and Australia to feed its vast refining capacity. While Chinese firms like Sichuan Yahua Industrial Group and Zhejiang Huayou Cobalt are building lithium sulfate plants in Zimbabwe to comply with local processing requirements, these facilities represent intermediate processing steps rather than full independence from China’s ecosystem.

Calisto Radithipa, founder of Botswana-based Kemcore, noted that lithium sulfate commands higher value than raw concentrates, generating increased royalties for host governments. However, critics like Farai Maguwu of the Centre for Natural Resources Governance warn that such strategies risk creating “the illusion of local industrialization” while deepening dependence on Chinese firms whose priorities may not align with long-term local development.

China’s Grip Extends to Second Life

China’s dominance is not limited to primary lithium production. As the electric vehicle market matures, battery recycling is becoming increasingly critical to supply security. According to Benchmark Mineral Intelligence, China is projected to process 3.6 million tonnes of scrap batteries in 2025, accounting for 78 percent of global pre-treatment capacity and 89 percent of black mass refining capacity.

Black mass, the shredded material produced from spent batteries, requires sophisticated refining to recover valuable lithium, nickel, and cobalt for reuse in new cathodes. China’s projected refining capacity for this material is expected to reach 2.5 million tonnes by 2025, up from 895,000 tonnes in 2022. North America, by contrast, accounts for just 21,000 tonnes of black mass refining capacity, while Europe manages 28,000 tonnes.

This recycling dominance ensures that even as batteries reach end-of-life, the materials flow back into Chinese-controlled supply chains. Fastmarkets reports that China’s recycling industry faces overcapacity challenges, with some refinery units operating at utilization rates as low as 20 to 30 percent. However, new national standards for black mass taking effect in July 2025 are expected to strengthen the supply chain by legalizing imports and providing unified production standards.

The concentration creates long-term economic challenges for recyclers globally. As battery chemistries evolve toward lithium iron phosphate (LFP) and away from nickel-cobalt-manganese (NCM) formulations, the intrinsic value of recyclable materials declines. “The lack of nickel and cobalt kills the economics of recycling LFP batteries,” noted Luke Sweeney, senior battery recycling analyst at Fastmarkets. This economic pressure disproportionately affects non-Chinese recyclers already struggling to compete with China’s scale advantages.

Can the West Break the Dependence?

Recognizing the strategic vulnerability of concentrated supply chains, the United States and Europe have launched aggressive efforts to localize lithium refining. Tesla began operations at its lithium refinery near Corpus Christi, Texas, in January 2025, designed to produce battery-grade lithium for its own EV production. Dutch supplier AMG continues shipping spodumene from Brazil to China for conversion before processing in Germany, highlighting how limited non-Chinese options remain.

However, analysts caution that capacity announcements do not equal supply security. “Those projects that have only recently been commissioned are in their ramp-up phases and have output well below their nameplate capacity,” noted BMI’s Braun. Srinivas Popuri emphasizes that meaningful diversification requires more than physical plants. “They need plants that run steadily at high yield, producing consistent battery-grade material that is qualified by major cathode and cell makers and backed by long-term offtake to support financing,” he explained.

The structural challenges extend beyond technical capacity. Lee of Arcane Capital Advisors argues that Western efforts to build parallel supply chains will result in “structurally higher-cost” operations that “will take far longer than the US and EU countries think.” Capital costs for projects in diversified regions typically run 50 percent higher than for incumbent producers, according to the IEA, while price volatility and economic uncertainty deter private investment.

Recent policy shifts have complicated these efforts. The gutting of major components of the US Inflation Reduction Act, which provided funding and incentives for batteries and EVs, has cooled investment sentiment. Meanwhile, Chinese firms benefit from subsidized credit, with the ten largest publicly traded Chinese mining companies paying effective interest rates of 3.7 percent compared to 7.1 percent for their foreign competitors, according to AidData research. This financing advantage allows Chinese firms to tolerate volatility and thinner margins while prioritizing strategic market maximization over short-term profitability.

Alternatives and the Long Timeline

While lithium is unlikely to be displaced from EV batteries within the next five to ten years, alternative technologies are emerging. Sodium-ion batteries represent the most promising alternative given their similarities to lithium-ion production processes, though with lower energy density suitable for specific applications. China currently produces 95 percent of high-purity manganese sulphate and 75 percent of purified phosphoric acid, key inputs for sodium-ion and LFP batteries, suggesting any transition would still run through Chinese supply chains.

For the United States, domestic production remains limited to one commercial-scale operation in Nevada, though the Smackover Formation in Texas has emerged as a potentially significant brine source. ExxonMobil and Chevron have acquired land positions in the region, with production potentially beginning in 2027. However, environmental concerns regarding water usage and toxic chemical management, combined with permitting delays, suggest that domestic supply will remain marginal for years.

David Zhang of the International Intelligent Vehicle Engineering Association in Hong Kong predicts China can maintain its lead for five to ten years based on current advantages. “But the bottleneck will change,” he cautions, suggesting that constraints may shift between different chemical pathways or toward other midstream inputs rather than lithium disappearing entirely from the supply chain.

The IEA projects that even by 2035, the average share of the top three refined material suppliers will decline only marginally to 82 percent, effectively returning to 2020 concentration levels. A realistic timeline for material diversification impact extends into the late 2020s and 2030s, leaving the global EV transition dependent on Chinese refining capabilities for the foreseeable future.

What to Know

• China controls 60-70% of global lithium chemical refining capacity despite ranking ninth in global lithium resources, creating a critical chokepoint in the EV supply chain.
• Refining is technically complex and energy intensive, requiring sophisticated industrial ecosystems that China has developed over decades, making it difficult for Western competitors to replicate quickly.
• Raw lithium from Australia (31% of mining), South America (27%), and Africa (19%) largely flows to China for processing into battery-grade carbonate and hydroxide.
• Lithium prices crashed over 80% between 2022 and 2024, forcing production cuts globally and delaying new projects, with recovery expected only by 2028.
• Zimbabwe’s February 2025 export ban on raw lithium highlights resource nationalism risks and supply chain vulnerabilities for Chinese refiners dependent on African hard rock.
• China dominates battery recycling with 89% of global black mass refining capacity, ensuring end-of-life materials re-enter Chinese-controlled supply chains.
• Western diversification efforts including Tesla’s Texas refinery face structural cost disadvantages (50% higher capital costs) and technical ramp-up challenges that will take until the late 2020s or 2030s to materialize.
• The United States imports 97% of its lithium, primarily from Argentina and Chile, but still requires Chinese processing for battery-grade materials, creating layered dependencies.