29.11.2022 What does the future hold? China's role in supplying key minerals for the global energy transition

The world faces major challenges in responsibly sourcing large quantities of minerals which are critical to the transition towards low-carbon energy sources. Consumption of these critical minerals - primarily nickel, copper, lithium and cobalt - is expected to increase, largely due to their use in the renewable energy sector. The study (External link) “China's Role in Supplying Critical Minerals for the Global Energy Transition: What Could the Future Hold?” was developed by the Leveraging Transparency to Reduce Corruption (LTRC) initiative, which is a joint project of Results for Development (R4D) and the Brookings Institute in August 2022. The study was presented and discussed at an event hosted by the GIZ Sector Programme Extractives and Development on November 2, 2022.

Caitlin Purdy and Rodrigo Castillo as authors of the study presented their key findings and answered questions from the audience. The study focuses on the raw materials lithium, cobalt, nickel and copper. Rodrigo Castillo highlighted that while China is an important mining country for many minerals, it also has a particular dominance in refining and production. He also emphasised China's efforts to build its own due diligence guidelines. Caitlin Purdy presented the scenarios developed in the study that could emerge in the future with regards to China's development in terms of control over the aforementioned minerals and the enforcement of due diligence in the mineral supply chains (see figure). Both authors were at LTRC at the time the study was developed, Caitlin Purdy has now transitioned to Environmental Resources Management (ERM).

Castillo, R., & Purdy, C. (2022). China’s role in supplying critical minerals for the global energy transition: what could the future hold?.

Dr. Yun Schüler-Zhou of the German Mineral Resources Agency (DERA), gave a general introduction into China's dominant role in the global extractives market, emphasising the rapid expansion and development that China has made in the extractives sector in a very short time. She mentioned that a particular role of China is the production of rare earths. Other countries highly depend on Chinese production, especially the processing of rare earths. Even though China has managed to integrate itself into most parts of the supply chain for renewable energy technologies, the country is nevertheless also dependent on raw material imports. To mitigate its own dependence on raw materials that are not mined in China, the country is investing directly in foreign mining projects to secure stable and reliable imports. This vertical integration is an expression of China’s dominant role in the raw materials supply chain and emphasises that good cooperation and reliable dialogue between the countries will be of great importance in the future.

Dr. Martin Erdmann from the German Federal Institute for Geosciences and Natural Resources (BGR) presented his pilot project on sustainability standards in the rare earths value chain and elaborated on the necessary exchange with Chinese state-owned mining companies.

As coordinator of the GIZ cluster “China in the World”, Dr. Jochen Weikert put the study and contributions into the context of his work in development cooperation and shed light on new perspectives both regarding extractives cooperation with China but also partner countries. In the context of the threat of climate change, he emphasised in particular the need for trade and cooperation in order to create the global energy and mobility transition with the help of minerals and preliminary products from China.

The event and lively discussions with the audience highlighted the importance of China's role in the supply of energy raw materials. An international audience reflected the increasing interest in the topic.

The GIZ Sector Programme Extractives and Development organised another event on sustainability and due diligence in the mineral supply chain in collaboration with the Sino-German Center for Sustainable Development (CSD) and the China Chamber of Commerce of Metals, Minerals & Chemicals Importers & Exporters (CCCMC) on November 24, 2022.

For more information, please contact Anja Straumann (External link) or Rosalie Seppelt (External link).