China reportedly now has the second-largest known reserves of lithium in the world, following the discovery of large new deposits.

The China Geological Survey under the Ministry of Natural Resources this week said the country’s share of the world’s known reserves had increased from 6 per cent to 16.5 per cent.

State media outlet Xinhua reported that a spodumene-type lithium belt spanning 2,800 kilometres and containing between 6.5 million tonnes and 30 million tonnes of lithium had been discovered in the country’s west.

Spodumene is a mineral that can be processed to extract lithium.

Substantial amounts of lithium had also been found in Tibet’s Qinghai-Xizang Plateau salt lakes, according to Xinhua.

Lithium is a key component in batteries used in electric vehicles, large-scale energy storage, electronic devices and more.

China was previously believed to have had the sixth-largest reserves of lithium in the world with Australia having the second-largest.

The discoveries knock Australia down to third place while Chile continues to have the largest reserves in the world.

IBISWorld industry analyst Nicholas Larter said lithium was key to China’s electric vehicle and renewable energy industries.

“Naturally, the country would like to internalise the mining and refining of the mineral, which is currently irreplaceable for these fast-growing industries, as it reduces its dependence on foreign sellers, instead relying on internal producers that it can more easily regulate,” he said.

Cameron Hughes, battery markets analyst at UK-based CRU, said that China accounted for about 65 per cent of global lithium demand last year while only producing about 25 per cent of global supply — making it heavily reliant on overseas production.

Mr Hughes said the discovery of the spodumene-type belt could be important in the long term however it was still in the early stages and, given its location, potentially hard to develop.

“Additionally, mining companies have to make applications to mine and explore resources and currently this one has not been claimed,” he said.

“As such, we are unlikely to see any production from it this decade.”

Almost all of the lithium mined in Australia is exported to China.

“The significant discoveries could threaten Australian miners in the future should the Chinese ore contain a high enough purity, as it would mean producers could concentrate their supply chains, limiting transport costs and making penetration by Australian suppliers more difficult,” said Mr Larter.

However, Mr Hughes expected the impact of the discovery on Australia’s lithium industry would be limited even in the long term.

“Demand is growing quickly meaning there will be demand for Australian and Chinese spodumene concentrate,” he said.

“Additionally, high-cost operations, such as Chinese lepidolite mines, would be at higher risk of being replaced by Chinese spodumene production than the lower cost Australian mines.”

Lepidolite is another mineral containing lithium however it is more expensive to extract than from spodumene.

Lithium price decline

Global lithium prices peaked in 2022 and have been declining ever since.

Mr Larter said this was mainly due to the slowing growth of electric vehicle purchases and elevated production prompted by the 2022 price spike.

“When lithium prices spiked in 2022, a swarm of projects came online as the minerals price crossed the all-in cost threshold for different mines,” he said.

“In response to these falling prices, several Australian mines are being placed into care and maintenance.

“At the same time, Chinese refiners have flooded the global market with processed lithium.”

The US has accused China of causing a “predatory” price drop as they seek to eliminate competing projects.

Jose Fernandez, under secretary for economic growth, energy and the environment at the US Department of State, told a briefing late in October that China was producing much more lithium “than the world needs today, by far”.

Mr Hughes said prices were expected to recover in 2025 as mines reducing or pausing production helped to balance the market.

“However, this will be short-lived, and prices will pull back again following 2025,” he said.

Mr Larter said growth in lithium demand for energy storage systems — such as large scale batteries for use on electricity grids — was expected to bolster prices in coming years.