The global race towards energy transition is stumbling into another Sino-Western war. As crude oil prices soar and the European Union is shifting towards a green transition, China is monopolizing critical minerals for renewable energy, with some $4 billion in investments and more than 5,152 projects across the African continent, according to data from the China Global Investment Tracker. The race is very much on. Several member countries of the European Union and the United States are turning to green energy in view of the threat of climate change, the geopolitical squeeze on oil caused by the war in Ukraine and the conflict in Gaza, which is jeopardizing the stability of energy prices.
The European Commission forecasts that demand for aluminum, which is essential for renewable energy, will skyrocket by 543% between 2020 and 2050, as will demand for lithium, copper, cobalt and nickel. This demand for 34 critical raw materials will only escalate as the Eurozone shifts towards the energy transition.
By way of example, Spain imported metals valued at $1.56 billion from African countries in 2021, according to the Observatory of Economic Complexity (OCE). Although this figure represents about 5% of its net imports of these materials, 8% of the metals processed by refineries in China with resources from these countries must be added.
Africa holds the key to some critical minerals; 70% of global mineral production stems from a mere four countries: South Africa, Algeria, Angola and Nigeria, all territories with which Beijing maintains economic ties. It is worth clarifying that although China supplies 100% of the rare-earth elements to the European Union, according to the Commission, it accomplishes this through its cultivation mines scattered across Africa.
The most significant stakeholders are government-owned companies such as the China Railway Engineering, China National Petroleum and Sinomach corporations, as well as other private firms in African nations such as Zambia, Sierra Leone and the Democratic Republic of Congo. In most cases, the Chinese mining business carries conditions for these countries in the Global South, like loans that have resulted in high levels of public debt.
To begin to guarantee this supply, the Western powers have begun to launch their own silk route after reaching an agreement with Xi’s former partners. The European Union, along with the G7, struck a deal with Zambia and the Democratic Republic of Congo in October to secure the supply of these precious commodities. The West will secure the supply of critical minerals, and in return the Lobito Corridor will be expanded — a key railway line at the southern tip of Africa.
Some experts, such as Yunnan Chen, a researcher for the British think-tank ODI, believe that Europe and Western countries have missed the opportunity to break into the mineral supply chain. “Even if the West tries to access mining resources, the actual processing, knowledge and technology is currently monopolized within China,” Chen said. “Europe is going to have trouble catching up, if it can at all.”
China now controls 90% of the processing of rare-earth elements, which are the most difficult minerals to cultivate and extract through a six-step process, according to a Goldman Sachs report.
Beijing: the global collector
The New Chinese Silk Road, known as the Belt and Road Initiative (BRI), is the economic operation that has brought about this monopoly through $1.3 trillion in loans, though this initiative began decades ago. The endeavor believed to be the world’s largest development program marked its 10th anniversary in October under the leadership of Xi Jinping. Ten years later, after an economic slump, the loss of half of the U.S. dollar reserves and a real estate crisis, China is not what it used to be.
Chinese banks do not have the same appetite for risk as they did a decade ago, and this has resulted in investments that are more commercial and on a smaller scale, according to Chen. “Chinese banks may be tougher than other official creditors who are more willing to make cuts or apply other forms of debt relief,” she adds. When Chinese banks grant loan write-offs, they tend to be quite small.
Beijing is currently the largest debt collector in the world and has provided 331 loans during the past two decades. Borrowing countries in the Global South owe approximately $1.1 trillion to Xi’s government, and half of their loans have now matured, according to a new report by AidData.
Angola and Kenya are among the countries most indebted to China, according to Boston University’s Global Development Policy Center. Linda Calabrese, a researcher for ODI and the Lau China Institute at King’s College London, believes that Africa has benefited from Chinese investment notwithstanding huge debts through rising demand, although she stresses that this needs to be considered on a case-by-case basis.
The Asian giant’s interests extend beyond Africa. Through the BRI, it has managed to pull clear in the global race in 150 countries, representing about 75% of the world. In addition to its investments in Africa and Latin America, Beijing secured the services of Australia in the last decade to exploit its lithium reserves, a key component in batteries. The Oceanic nation possesses 47% of the world’s lithium reserves, according to the IEA.
Chinese firms, like Hanking Holdings, Yancoal, China Minmetals, ChemChina and the China Light and Power Company, are leading in the Australian lithium sector, although investments in this sector have slumped in recent years.