A crackdown on rural Jiangxi’s lithium sector that might snarl global supply chains has cast a spotlight on the conflict between rural economic development and environmental protection. Earlier this week, investigation teams from a number of central government agencies—including the Ministry of Natural Resources, Ministry of Industry and Information Technology, National Development and Reform Commission, and the Ministry of Public Security, according to reporting by Caixin—descended on Yichun City, Jiangxi to investigate lithium mining, putting a halt to private lepidolite extraction operations in the area. Lepidolite ore can be processed into lithium. Bloomberg News reported on the surprise shutdown of the lithium rich-region’s mining economy:
Ore-processing operations in Yichun have been ordered to stop as investigators probe alleged violations at lithium mines, Yicai newspaper reported. That threatens somewhere between 8% and 13% of global supply, according to various analyst estimates, although it’s unclear for how long the immediate shutdowns will last.
[…] All lepidolite mining in Yichun aside from those by a state-owned company have been suspended, but refineries are still operational, Dennis Ip and Leo Ho, analysts at Daiwa Capital Markets, said.
[…] Some companies had already been targeted for infringements, including incidents of pollution, over the past year. This is a much wider crackdown, and involves officials from central government departments including the Ministry of Natural Resources.
The Beijing officials will mainly look at violations at lithium mines and seek to guide the “healthy development” of the industry, according to the Yicai report. It will largely target those mining without permits or with expired licenses, it said. [Source]
The demand for lithium is driven by China’s electric car battery industry. Fujian-based battery manufacturer CATL is now worth more than General Motors and Ford combined. While China dominates lithium battery production, its domestic supplies of lithium are considered “low grade and high cost.” Nevertheless, soaring demand for lithium amidst increased demand for electric cars led to an increase in illegal mining in Jiangxi. Mining has left some local water sources polluted with thallium, a toxic metal. At Reuters, Siyi Liu, Ningqei Qin, and Dominique Patton reported that the rapid expansion of illegal mining in Jiangxi was causing environmental issues:
“Environmental issues and illegal mining are the prominent problems in Jiangxi, where around one third of domestic lithium resource supply comes from,” said Wu Wei, assistant professor at the China New Energy Policy Research Institute of Xiamen University.
[…] Jiangxi has large reserves of lepidolite, a lithium-containing mineral. But the relatively low grade of lithium in it requires heavy extraction, said Wu.
“The mining and processing also pollute water as a result of its byproducts like tantalum and thallium,” he said.
[…] Mining in Yichun has boomed in the last two years, growing from a couple of dozen ore selection plants to more than 200, said the analyst, adding that more inspections are likely. [Source]
State media outlet Global Times, relaying reporting from financial magazine Caijing, blamed the “chaos” of lepidolite extraction in Jiangxi on extra-legal mining by villagers looking to make a windfall:
According to the report, certain village people in Yichun were obsessed with digging up lepidolite ore in local mining areas, mountains and woods to sell, as surging orders for NEVs in China in recent years have boosted demand and prices of lithium batteries and in turn, the raw materials of lithium.
[…] According to the Caijing report, some Yichun villagers could make up to 1,000 yuan a day by digging up lepidolite ore. In comparison, rural residents of Yichun earned less than 1,600 yuan per month per capita in 2021.
The disorderly extraction caused chaos, including environmental damage and exploitation without a license. Several truck accidents have happened in certain mining areas of Yichun recently, as the large-scale operation of transport vehicles by lithium companies has affected transportation, the yicai.com report said. [Source]
The expansion in illegal mining activity may also have been driven by a 2022 drought that left some Jiangxi farmers impoverished. One third of arable Chinese farmland is threatened by degradation, acidification, and salinization. The danger, Chinese meteorologists warn, is only getting worse. During a February press conference, a spokesperson for the China Meteorological Administration, a central government agency, said: “At present, global warming is accelerating… and under the impact of climate change, the climate system is becoming increasingly unstable,” and warned provincial governments to prepare for more droughts and flooding in the coming year.
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