There is an increasingly popular view in China that it should reduce its dependence on imported mineral resources by increasing domestic mine production, and meanwhile ramp up state support for investment in overseas mining projects.

An academician of the Chinese Academy of Sciences recently called for the establishment of new national organisations for developing strategic mineral resources around the globe – similar to China National Offshore Oil Corporation.

Ironically, such anxieties afflict not only China but also Western countries. China is responsible for refining 35 per cent of nickel, and 50 to 70 per cent of lithium and cobalt globally. These intermediate products are supplied to both Chinese and foreign companies in downstream industries. Chinese companies are also predominant in the production of battery chemicals and battery cells.

Fears that China might weaponise this trade are even reflected in Western popular culture; the recent Netflix sci-fi satire Don’t Look Up includes a plotline where China’s control of critical resources forces the US to mine a comet crashing to Earth.

China’s grip on minerals that power our future leaves US in the dust

A major policy objective for many countries in the fossil fuel economy has been to increase self-reliance and diversify sources, especially of oil. If this traditional view of energy security is applied blindly to mineral resources, however, it may harm rather than enhance resource security in China and Western countries; nor would it help the global green energy transition.

Fundamental differences exist between mineral and energy resources. While a major disruption to oil and gas supplies could lead to economic and social chaos, a shortage of metal resources would impact certain industries, such as EV manufacturing, with the use of existing electric cars unaffected.

Unlike oil and gas, minerals are recyclable. Over 98 per cent of lead-acid batteries are recovered and recycled. EV batteries may achieve a high recycling rate once an economy of scale is reached.

Furthermore, mineral reserves are more of an economic concept than a geological one in many cases. As prices increase, exploration and mining intensify, often leading to expanded reserves. Data from the US Geological Survey indicates that global copper reserves were 280 million tons in 1970, but although 580 million tons were mined between 1970 and 2020, the world’s copper reserves still increased to 870 million tons in 2020.

Research has shown China’s domestic resources can meet the national EV industry’s demand for lithium. China’s dependence on imports stems largely from the mining and transport costs of these resources, mainly located in the western provinces.

Battery technologies are undergoing rapid development. Research on low-cobalt, or even cobalt-free batteries, has progressed fast, aiming to reduce consumption of this precious metal. However, a decrease in the use of cobalt usually implies an increase in the quantity of nickel required to maintain performance.

The global supply chains of critical minerals also differ substantially from those of oil and gas. While national companies play a leading role in oil supply chains, supply chains of critical minerals are led by entrepreneurs and international capital. For example, large lithium mines in Australia are jointly owned by Chinese and Western companies.

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The traditional view of energy security may not be effective even in the energy sector. Facing high oil prices in the late 2000s, China’s national oil companies made bold investments in overseas projects, but it is unknown whether this improved China’s energy security, because the oil and gas produced in overseas equity projects are not necessarily shipped back to China, but rather traded in the global markets.

Worse, a populist perspective that overemphasises geopolitical factors may prompt rising resource nationalism. Foreign investments in the resource sectors would consequently become more difficult and costly, slowing the upscaling of global EV and battery production.

As global competition for critical mineral resources continues and even intensifies, companies will base investment decisions on their assessment of the trajectories of mineral reserves, mining capacity, battery technologies, and EV markets. Competition arising from their decisions will promote more effective development and use of resources in the global EV supply chain.

But these enterprise-led activities should be distinguished from the so-called big power game. If a populist perspective is adopted to guide metal resource policies in countries, it could in fact be counterproductive for the enhancement of resource security.

Hao Tan is an associate professor with Newcastle Business School at The University of Newcastle, Australia, and a researcher on energy transitions in China and their global implications