China is oversupplying lithium to eliminate rivals, the US official told Reuters

By Sergio Goncalves

LISBON (Reuters) – Chinese lithium producers are flooding the global market with the critical metal and causing a “predatory” drop in prices as they seek to eliminate competing projects, a senior U.S. official said on a visit to Portugal, which has reserves ample lithium.

Jose Fernandez, undersecretary for economic growth, energy and environment at the US State Department, told a briefing late Monday that China is producing far more lithium “by far than the world needs today.”

“This is an intentional response by the People’s Republic of China to what we are trying to do” with the Inflation Reduction Act — the largest climate and energy investment package in U.S. history, valued at more than $400 billion, Fernandez said , adding:

“They engage in predatory pricing … (they) drive the price down until the competition is gone. This is what happens.”

China accounts for about two-thirds of the world’s production of lithium chemicals, which are mainly used in battery technologies, including for electric cars. Lithium prices have fallen more than 80% in the past year, largely due to overproduction in China and falling demand for electric vehicles.

However, the price collapse is also affecting China, as it has forced Chinese companies such as battery giant CATL to suspend production at certain mines.

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Europe aims to reduce its dependence on imports from China and other countries of lithium and other materials essential for the green transition.

Fernandez said the low price “constrains our ability to diversify our large-scale, global supply chains” and also affects countries like Portugal that need investment to develop these industries.

Falling prices have forced many global lithium producers to cut production and cut jobs.

Portugal, with around 60,000 tonnes of known reserves, is already Europe’s largest producer of lithium, traditionally mined for ceramics.

Along with neighboring Spain, the country wants to take advantage of local lithium deposits, aiming to cover the entire value chain from mining and refining to cell and battery manufacturing to battery recycling.

Several mining companies in Portugal have been looking for financing, customers and suppliers to start projects.

“We want to help them and we think we can … lithium mining companies everywhere have to survive this difficult phase that has been created by predatory pricing,” Fernandez said.

Chinese Premier Li Qiang used his speech at a meeting of the World Economic Forum in Dalian in June to respond to accusations by the United States and the EU that Chinese firms receive unfair subsidies and are ready to flood their markets with technology cheap ecological.

Trade tensions escalated last Friday when the European Union said it would press ahead with high tariffs on Chinese-made electric vehicles to counter what it sees as unfair Chinese subsidies, following a year-long anti-subsidy investigation. China imposed temporary anti-dumping measures on EU cognac imports on Tuesday.