In January this year the Chinese government scrapped subsidies provided to buyers of electric vehicles (EVs) which it has been offering since 2010, a development that did not quiet unsettle the global lithium market at the time.
The rationale behind the subsidy policy on EVs had been to level the price difference with combustion vehicles to make them commercially viable.
For a long time this has enabled China to become the world’s biggest EV market hence the reason why it controls the global EV supply chain, including raw materials.
In addition, China accounts for over 70% of global EV battery production capacity.
But it was until April this year when battery-grade lithium carbonate prices dropped to a 19-month low of 165 000 Chinese Yuan (CYN) per tonne equivalent to US$23 916 that markets rattled.
In December of 2022, battery-grade lithium carbonate prices in China had soared to 597 500CYN per tonne equivalent of US$86 343, which was a 1 000% growth in two years, data from Trading Economics showed.
Ironically, while the Chinese Communist Party-led administration made changes to its EVs industry, its counterparts in Harare were taking decisive action on its huge lithium reserves which provides a key ingredient in the EVs battery production.
A month earlier Zimbabwe through the Base Mineral Export Control Act had banned all raw lithium ore exports with the government saying the country had lost 1.7 billion euros from exporting unprocessed lithium.
In January another directive was issued to the effect of banning export of all raw mineral ores as authorities hymned the chorus of resource nationalism.
Resource nationalism refers to a phenomenon were governments adopt policies that try to increase their share of the profits from the extraction of resources.
Namibia earlier this month also announced a ban on export of raw mineral ore, including its lithium.
Lithium known as the “white gold’ is currently the most sought after mineral which is a critical component in the manufacture of high storage batteries for EVs, smartphones and various other electrical gadgets.
Zimbabwe recently discovered some of the world’s largest lithium deposits scattered across the country making it the biggest reservoir of lithium deposits in Africa and setting it on the path to be the world’s 5th largest primary producer of lithium by 2025 taking advantage of the several massive investments worth over a cumulative US$1 billion injected in the past two years,
Zimbabwe is the latest country in a wave of resource nationalism, wherein nations defend their mineral resources against exploitation by outsiders as their governments seek to maximize profit from the mineral wealth found within their borders.
Resource-rich nations such as Zimbabwe have for long been “price-takers” and often been arm-twisted to accept pre-determined prices of their minerals. But this could soon change.
“No lithium-bearing ores, or unbeneficiated lithium whatsoever, shall be exported from Zimbabwe to another country except under the written permit of the minister,” recently said Mine and Mining Development Minister Winston Chitando.
“If we continue exporting raw lithium we will go nowhere. We want to see lithium batteries being developed in the country.”
The discovery of large lithium deposits across the country resulted in a rush by artisanal miners who invaded resource-rich areas such as Sandawana Mine in Mberengwa, Bikita and Buhera among others in search of the white gold.
At the time of the ban on lithium exports, most artisanal miners were left stranded with huge stockpiles of ore that could not be exported.
There was widespread criticism over the decision as it was perceived to be excluding locals.
Farai Maguwu, director at Center for Natural Resource Governance in an interview was livid over the decision to freeze out locals who had shown capacity to produce.
“If government decides on going it alone, let it be inward driven with local communities who are the artisanal miners contributing to production. In the presence of the ban we still have lawful exportation of raw lithium through several Chinese companies that have acquired permits from the minister,” he argued.
Some market watchers further argued that the move was rather hurried as the country is not yet ready to ensure that all its resources are processed before export.
“Mining is capital intensive. If you don’t have the money for beneficiation its difficult to compete yet we know that in mining it’s a race against time. You have to get as much as you can out of the ground as quickly as possible and sell it while the prices are favorable,” says economic expert, Professor Gift Mugano.
According to investigations by this publication there is over a million tonne stockpile of raw lithium ore across the country held by both primary producers and small scale artisanal miners that have not been exported.
This large inventory could have fetched three-fold the price six months ago than what it’s currently worth given that battery-grade lithium carbonate prices have fallen to around US$ 24 000 per tonne currently from US$ 83 343 in December 2022.
At Sandawana Mine in Mberengwa where the government has a controlling stake of 65%, over 600,000 tonnes of high-grade lithium ore, valued at over US$ 216 million has been lying idle for over six months now yet prices continue to tumble to record levels.
Nevertheless, Zimbabwe remains adamant to consolidate and value add its massive lithium resource.
Just like Namibia, Zimbabwe follows Indonesia, which in 2019 announced a ban on the export of raw ores by 2022.
Highly industrialized western economies have been very critical of Indonesia and questioned the legality of such sweeping bans.
In November 2022, the World Trade Organisation (WTO) said Indonesia’s action was inconsistent with international trade rules after complaints by the EU and the US.
Following objections from the EU and the US, the WTO in November 2022 declared Indonesia’s behaviour to be in violation of international trade laws.
They argued that the ban was in violation of Article XI: 1 of the General Agreement on Tariffs and Trade (GATT) 1994.
It states as follows, “No prohibitions or restrictions other than duties, taxes or other charges, whether made effective through quotas, import or export licenses or other measures, shall be instituted or maintained by any contracting party on the importation of any product of the territory of any other contracting party or on the exportation or sale for export of any product destined for the territory of any other contracting party.”
As stated by research firm, Fitch Solutions in its 2021 report, the latest wave of resource nationalism is expected to continue over the coming few years, as underlying drivers of resource nationalism and government intervention will remain in play.
However Zimbabwe exempted several companies that are in the process of developing mines or processing plants that includes Chinese firms Zhejiang Huayou Cobalt, Sinomine Resource Group and Chengxin Lithium Group which have invested US$678 million into lithium projects across the country.
While analysts foresee lithium prices improving as the year progress, it remains highly unlikely that prices will reach eye-watering levels of November 2022.
Meanwhile, as the race to maximize cashing in on lithium demand rages on among major resource countries such as Australia, Chile and Argentina, Zimbabwe needs to quicken its value-addition agenda to cushion itself from global price shocks lest it remains stuck between its mineral and a hard rock.
