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.
اضافة اعلان
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. Will Zimbabwe’s decision usher in a new wave
of resource nationalism as other countries move to protect their raw resources
from foreign exploitation?
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 US 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.
Under the new Zimbabwean law, any export of lithium ore (raw
lithium) will require special permission demonstrating that the exporter has
set up local manufacturing facilities. Foreign companies cannot sell ore but
can export concentrates, the powder created from crushing rocks and processing
the ore. Exporters that do not 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.
The rationale behind Zimbabwe’s decision reflects a new calculus in rising electric vehicle sales. Instead of supplying raw materials, the country wants to be a part of the manufacturing process.
The rationale behind Zimbabwe’s decision reflects a new
calculus in rising electric vehicle sales. Instead of supplying raw materials, the
country wants to be a part of the manufacturing process. Zimbabwe’s move isn’t
designed to roll back centuries of colonialism. 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. While Chile has not banned the export of
lithium, it has not fully succeeded in building up its own processing power.
The result has been a steady government increase in royalty levies on foreign
producers operating in the country.
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. Will China apply pressure on the government using all
the Zimbabwean
debt it holds to get special exemptions? If so, the entire attempt to
regain control over the lithium trade will be for nothing.
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.
Regardless of the viability, resource nationalism will be a
central theme in 2023. As the global economy recovers from the supply chain
crisis of the immediate post-pandemic period, new challenges have emerged
concerning the technology and raw materials that make our devices (and thus the
world) function. 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 the global economy recovers from the supply chain crisis of the immediate post-pandemic period, new challenges have emerged concerning the technology and raw materials that make our devices (and thus the world) function.
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.
This year, we might see the start of a meaningful reorganization of the global
commodity trade, starting with minerals like lithium and ending with how oil is
traded. Do not expect to see these changes overnight, but the seeds of
transformation have been planted. It is 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. Twitter: @ibnezra
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