In firm hands China controls the entire supply chain for batteries

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Fraunhofer-Einrichtung Forschungsfertigung Batteriezelle FFB

Universität Münster

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Taiwan Machine Tool & Accessory Builders' Association (TMBA)

Wuxi InfiMotion Technology Co., Ltd.

The production of batteries requires a complex and globally interconnected supply chain. A recent study shows that China dominates almost the entire value chain of lithium-ion batteries.

Lithium, cobalt, nickel, and manganese are indispensable for the production of battery cells when it comes to the mobility transition. In large battery packs, such as those installed in a Tesla Model S Plaid, there are no less than around 122 kilograms of so-called mineral raw materials. Geographically, however, only a few countries have the resources needed for the large-scale expansion of electromobility, such as China, Australia, and the Democratic Republic of the Congo. The challenge now is that mineral raw materials are at the very beginning of the supply chain for battery cell production, and Europe is almost entirely dependent on imports. The study by the University of Münster (Germany) and the Fraunhofer Institute for Battery Cell Production Research (FFB) now more precisely outlines the ownership structures behind mines, refineries, and production facilities along the entire battery supply chain.

Europe's dependence on China poses risks

The results now reveal China's supremacy, as the country dominates nearly the entire value chain of lithium-ion batteries, from raw material extraction to battery manufacturing. Inevitably, China controls both national and international production capacities. The only exception is the raw material manganese. The fact that China produces the majority of lithium iron phosphate active materials with a share of over 98 percent means a direct dependency of Europe on this cheaper battery chemistry. This growing raw material dominance of China endangers the future of European electromobility. This dependency makes Europe vulnerable. Geopolitical tensions or export stops could therefore lead to massive economic damage and losses running into billions, as experts warn.

The West is caught between catching up and dependence

Similar to China, Europe and the USA are also intensifying their efforts to gain greater control over the supply chain of lithium-ion battery raw materials by acquiring mines and refineries. While the USA ranks second worldwide in ownership stakes in lithium mining and Europe's stakes are comparatively low, the picture is reversed for nickel and cobalt. Australia, Indonesia, and the Democratic Republic of the Congo, defined as key regions for the extraction of lithium, nickel, and cobalt, are particularly affected by corporate takeovers. About 74 percent of the world's lithium comes from Australia and Chile. However, Chinese (29 percent) and US companies (26 percent) hold the largest shares in production. Europe currently holds no significant lithium shares abroad. These developments underscore the global competition for critical raw materials and the strategic realignment of value chains.

Export restrictions in the event of geopolitical conflicts would have far-reaching impacts on the stability of the global battery supply chain. Possible levers for a secure and sovereign battery supply chain in Europe might therefore include investments in expanding its own refining capacities, promoting strategic raw material partnerships, and strengthening the local circular economy. The joint paper by FFB and the University of Münster is therefore based on a comprehensive data analysis. For this purpose, the ownership structures along the global lithium-ion battery supply chain were analyzed and compared with the geographical distribution of production shares, as explained. It contains an overview of ownership structures and production shares in the mentioned supply chain with regard to the raw materials lithium, nickel, cobalt, and manganese.