US exit leaves China $1T of Afghan metals
Rich stores of lithium and REEs may take China time to develop Metal Tech News – September 1, 2021
Last updated 9/8/2021 at 2:26pm
The United States' withdrawal of troops from Afghanistan opened the door for China to swoop in and lay claim to the more than $1 trillion worth of lithium, rare earths, and other metals and gems estimated to lie below a landscape marked by more than 40 years of continuous war.
Digging up the rich natural resources in Afghanistan will not be easy and it is not likely that China will consider the now Taliban-run country as a dependable source of critical minerals and metals in the near term, according to IndexBox, a market research firm that utilizes an artificial intelligence platform to analyze big data for its analysts.
"It is widely viewed that China will construct lithium mining facilities in Afghanistan, but this is very unlikely in the near future due to the difficult military and political situation there," IndexBox penned in an Aug. 30 report.
This does not mean Beijing is not interested in the massive mineral wealth Afghanistan has to offer.
More than a decade ago, an internal report penned by the U.S. Department of Defense said Afghanistan could become the "Saudi Arabia of lithium" due to the rich stores of this battery metal found there.
With the rapid adoption of electric vehicles and renewable energy, both of which rely heavily on lithium-ion batteries, the global demand for lithium has risen significantly in recent years and is expected to continue to rocket higher over the coming two decades.
"Lithium consumption for batteries has increased significantly in recent years because rechargeable lithium batteries are used extensively in the growing market for portable electronic devices and increasingly are used in electric tools, electric vehicles, and grid storage applications," the U.S. Geological Survey penned in its 2021 mineral commodities report.
China, which has its own rapidly expanding EV sector and currently dominates global production of the lithium hydroxide that goes into lithium batteries, is seeking new supplies of the lithium carbonate that it can upgrade to this battery material.
With 1.5 million metric tons of reserves, China has the option to increase domestic lithium carbonate mining but is looking for outside sources to supplement its supply of this increasingly important battery metal.
Due to its proximity, rich lithium reserves, and a likely need for foreign investments to realize the value of those reserves, Afghanistan is a prime prospect for China's strategy of investing in infrastructure and mining projects as a means of securing the minerals and metals it needs.
In addition to lithium, Afghanistan is considered to be rich in rare earth elements, a group of metals required for a wide range of technologies.
Much like lithium, China accounts for about 60% of the rare earths mined during 2020 but dominates global production of the upgraded rare earth metals used in EV motors, wind turbines, and an enormous variety of high-tech devices.
It is expected that China has its eye on securing some of the estimated 1.4 million metric tons of rare earths found in Afghanistan deposits.
IndexBox analysts, however, believe China will be cautious in its Afghanistan mining investments due to the political instability of the now Taliban-led country.
"Recently in China, there have been discussions about creating a mining facility in Afghanistan for rare earth metals to provide one means of expanding their resource reserves," the research firm penned in its report. "Implementation of such a project in the near future is highly unlikely, mostly due to the difficult military and political situation in the country."
Even before the Biden administration's hasty withdrawal of U.S. troops, which allowed the Taliban to take back control, the World Bank highlighted the challenges of investing in Afghanistan.
"Private sector development and diversification is constrained by insecurity, political instability, weak institutions, inadequate infrastructure, widespread corruption, and a difficult business environment," the global funding agency penned in a report on Afghanistan earlier this year.
China has already experienced how difficult it can be to build a mine in the war-torn country.
In 2008, a China state-owned consortium called MCC-JCL Aynak Minerals received a permit to rent and develop a mine at Mes Aynak, home to what is considered to be the second-largest deposit of copper in the world.
A bomb attack, contract disputes, threats of armed conflict in Afghanistan, archaeological digs, and a shortage of necessary resources such as coal and phosphate has delayed China's hopes of developing the globally significant copper mine. Despite plans to begin producing copper by around 2013, development of a mine at Mes Aynak has not begun.
Now, however, China has a new government to deal with in Afghanistan.
Earlier this month, Foreign Ministry Spokesperson Hua Chunying said China has "maintained contact and communication with the Afghan Taliban."
"The Afghan Taliban said on multiple occasions that it hopes to grow sound relations with China, looks forward to China's participation in Afghanistan's reconstruction and development," she added. "We are ready to continue to develop good-neighborliness and friendly cooperation with Afghanistan and play a constructive role in Afghanistan's peace and reconstruction."
Whether that cooperation extends to developing the more than $1 trillion of lithium, rare earths, copper, precious metals, gemstones, and other minerals that could provide an economic platform for Afghanistan remains to be seen.
Further details on lithium markets in China can be read in the IndexBox report "China - Lithium Carbonate - Market Analysis, Forecast, Size, Trends and Insights" at https://www.indexbox.io/blog/lithium-carbonate-market-in-china-key-insights-2021/