中国研究集团-英国和中国：关键矿产（英）-2021.11-18页_514kb

The UK and China: Critical Minerals Summary

Core Content

Critical minerals are essential for the UK's transition to a net zero economy and are vital for technologies such as electric vehicles, wind turbines, and energy storage systems. These minerals are defined by their strategic importance to economic and national security, with supply chain vulnerabilities posing significant risks. The global demand for critical minerals is expected to increase dramatically, with the World Bank projecting a 500% rise in production by 2050 to meet clean energy goals.

China has emerged as the dominant player in the critical minerals supply chain, particularly in the midstream refining and processing stages, controlling up to 90% of rare earths processing and 80% of lithium battery manufacturing. This dominance is the result of decades of state support, strategic industrial policies, and the consolidation of the industry into six state-owned enterprises (SOEs), which now account for 80% of China's rare earth capacity. China's "Two Resources, Two Markets" strategy further reinforces its position by integrating domestic and global supply chains.

Main Points

• Critical minerals are essential for clean energy and modern technologies
  These minerals are the foundation of the green industrial revolution, used in everything from electric vehicles to wind turbines and energy storage systems. Their importance is growing due to the increasing adoption of renewable technologies.

• Global demand is rising sharply
  The demand for critical minerals is expected to surge, with lithium, nickel, and cobalt being key drivers due to the growth of electric vehicles and batteries. Rare earth elements (REEs) are also crucial for wind turbines and other clean technologies.

• China's dominance in the supply chain
  China controls a significant portion of the rare earths supply chain, particularly in the midstream and downstream stages. It is the largest importer and exporter of critical minerals, and its state-backed companies are actively acquiring mining rights in other countries.

• UK's reliance on China
  Despite efforts to develop domestic capabilities, the UK remains heavily dependent on China for critical minerals, especially in the midstream and downstream sectors. Government support for projects like the Nissan-Envision AESC gigafactory and the use of BYD batteries in UK buses highlights this dependency.

• Strategic and environmental concerns
  China's state control over the industry raises concerns about strategic dependency and the potential for economic coercion. Additionally, the environmental and ethical issues associated with rare earth mining, such as toxic waste and coercive labor practices, are significant challenges.

Key Information

UK Demand Drivers

1. Renewable energy expansion
   The UK aims to quadruple offshore wind capacity to 40GW by 2030, requiring substantial amounts of neodymium, dysprosium, and praseodymium.
2. Electric vehicle transition
   The UK plans to phase out petrol and diesel vehicles by 2030 and hybrid vehicles by 2035, increasing demand for lithium, cobalt, and nickel.
3. Energy storage needs
   The need for flexible, low-carbon energy storage systems will further drive demand for critical minerals.

China's Role

• Midstream dominance
  China controls 89% of rare earths refining and processing, and 80% of lithium battery manufacturing.
• Global investments
  Chinese firms are acquiring mining rights in countries like Guinea, Argentina, and the Democratic Republic of Congo (DRC), enhancing their global reach.
• Strategic industrial policies
  The Chinese government has implemented a range of policies to support its rare earths industry, including subsidies, R&D support, and the consolidation of the sector into SOEs.

UK's Challenges

• Limited domestic production
  The UK has minimal domestic production of critical minerals and relies heavily on imports, particularly from China.
• Lack of strategic focus
  The UK's current approach to critical minerals is fragmented and lacks a cohesive strategy, unlike the comprehensive plans of the US, Australia, and EU.
• Ethical and environmental risks
  The UK faces concerns about the environmental impact and ethical issues of China's mining operations, including toxic byproducts and labor practices.

Policy Options

• Diversification of supply chains
  The UK needs to diversify its sources of critical minerals to reduce strategic dependency. This includes investing in alternative suppliers and developing new technologies to reduce reliance on specific minerals.
• Investment in domestic production
  Establishing a domestic supply chain, such as a mine-to-magnet facility, would require significant investment and time, as setting up such infrastructure can take 7-10 years.
• Policy shift
  The UK should move away from a purely market-based approach and adopt a more resilience-focused strategy, aligning with the goals of other developed nations.

Conclusion

The UK must take urgent action to secure its supply of critical minerals, given the growing demand and China's dominant position in the supply chain. A lack of strategic planning has left the UK vulnerable to supply disruptions and ethical concerns. The government needs to develop a more comprehensive and resilient strategy to protect its national security and support its transition to a green economy.