2023-04-18 16:41:00
Will the energy transition trigger an international trade war in the coming years? The risk, even limited, exists. The need to secure the supply of mineral resources and strategic metals (such as lithium, nickel, rare earths, cobalt, manganese, graphite) will become more and more pressing, due to an increasing demand. be multiplied by six for certain metals. For producing countries, it is tempting to enjoy a dominant position to promote their interests.
This is what China, India, Vietnam, Russia, Argentina and Kazakhstan did between January 2009 and December 2020, a period during which the number of restrictions on their international sales, mainly in the form of taxes, quintupled, from 3,337 to 18,263, peak an OECD report.
Risk of a price increase
However, these interventions concern only 10% of the exports of these critical minerals, in particular lithium, borates, cobalt, precious metals, manganese and magnesium, where dominant positions exist. Thus, China concentrates the production of magnesium and manganese, Vietnam and Argentina that of rare earths and lithium, the Democratic Republic of Congo (DRC) that of cobalt. Such interventions, likely to lead to increases in the price of metals and minerals but also to reduce their availability, could multiply in the future.
Because even if the production of lithium, rare earths, chromium, arsenic, cobalt, titanium, selenium and magnesium has already progressed strongly over the last decade (for example, +33% for manganese and +208% for lithium), the current supply will not be sufficient to meet the needs of new industrial sectors. They are already being set up in many countries to produce batteries for electric vehicles, solar panels, wind turbines, electrical networks… All necessary for the decarbonization of the global economy.
Thus, an electric car requires six times more metals than a thermal model and an onshore wind turbine needs nine times more metals than a gas-fired power plant, according to calculations by the International Energy Agency (IEA). ). The transition from the global fleet of thermal cars to electric models therefore represents a real challenge. Thus, according to the scenario aiming for carbon neutrality at the end of the century adopted in the Paris Agreement on the climate, the world demand for lithium should be 42 times greater and that of graphite 25 times greater by 2040 .
Growing trade
Beyond the issue of production of these strategic minerals, their international trade is also preponderant to meet the needs. Between 2009 and 2019, this market segment saw its value increase by 38% compared to an average of 31% for all products. Lithium again stands out with a spectacular increase of 438% in the value of its market over the period. A trade barrier represents an additional risk that could slow down the energy transition, warns the OECD.
The organization also raises the problem of the concentration of imports, particularly in developed economies, which find themselves in competition to ensure their supply. Also, the European Union has taken legal measures within the framework of its green plan to rationalize its purchases, relaunch local mining prospecting and encourage recycling, in order to reduce its dependence on its imports. The United States has been doing the same for a few years, in particular to reduce dependence on imports from China.
More recently, the Biden administration approached several producing countries in Africa, as part of the president’s green plan, theInflation Reduction Act (IRA). The latter also poses competition problems for its allies. Last week, European Trade Commissioner Valdis Dombrovskis went to plead the cause of the Old Continent to “resolve the discriminatory elements” contained, according to Brussels, in the IRA. The protectionist law notably plans to grant subsidies to support green industries made in USAa windfall effect for companies that prefer to invest in the United States rather than in Europe.
Brussels argues in particular in the United States that they signed an agreement of this type at the end of March with Japan, relating to “supply chains for critical materials and batteries for electric vehicles”. This device will allow American buyers of an electric vehicle to be able to benefit from the subsidy of 7,500 dollars if they choose a Japanese model. Access to these subsidies concerns countries linked to a free trade agreement with the United States. “A term that includes recently negotiated agreements relating to critical materials”says the US Treasury.
Competition between importing countries
For the moment, the European request has not been successful. The EU is not alone in this case. Canada and Mexico are also waiting. At an IMF meeting in Washington, Canada’s finance minister warned against “the race for subsidies”with the risk that “This is taking us to the bottom”pushing countries to grant ever more tax relief.
This episode illustrates that the tensions that could be exacerbated not only between producing countries and consuming countries of critical metals but also between producing countries, because no country wants to miss the industrial turning point represented by the energy transition.
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