Latest / China Economy with Fexingo: Beijing's Policies, Trade, and Asia-Pacific Markets / Why China Is Betting Billions on African Lithium Refineries
Transcript
- Lucas: So China has been buying lithium mines in Africa for years — but the play is shifting. Instead of just shipping raw ore back to refineries in China, companies like CATL and Ganfeng are now building processing plants right there in Zimbabwe and the Democratic Republic of Congo. Luna: That's a pretty big operational shift. I mean, refining lithium is energy-intensive and technically complex. Why move that step outside China? Lucas: Two reasons. First, the US and the EU have been tightening tariffs on Chinese-processed battery materials. If the refinery is in Zimbabwe, the finished lithium hydroxide can be exported to, say, Tesla's Berlin factory without triggering the same trade barriers. Luna: So it's a tariff-avoidance move disguised as industrial development. What's the second reason? Lucas: Resource nationalism. African governments are getting smarter. They've watched the old extractive model — ship ore out, zero local jobs — and they're demanding more value capture. Zimbabwe already banned raw lithium exports last year. If you don't build a refinery, you don't get the mine. Luna: Right, and that's where Chinese state-backed financing comes in. It's not just corporate balance sheets — there's policy lending behind these deals. Lucas: Exactly. Since January 2025, I've tracked about four point two billion dollars in announced lithium-processing investments in Africa, mostly by Chinese firms. The money comes partly from the companies, but also from China Development Bank and the Export-Import Bank of China. These are the same lenders that funded Belt and Road infrastructure. Luna: Four point two billion — that's real money, but it's not gigantic compared to the scale of China's domestic refining capacity. What's the strategic endgame? Lucas: The goal is to control the full supply chain from mine to cathode, but outside China's borders. If you look at the yuan per dollar rate — it's at 6.76 today, still weak — it actually makes overseas investment cheaper for Chinese firms. They can convert yuan into dollars and buy assets at a discount relative to a few years ago. Luna: And the trade-weighted dollar index is at 119.5, so the dollar is strong. That further incentivizes Chinese companies to park capital in hard assets abroad rather than hold yuan. Lucas: Precisely. Now, let's talk about a specific deal. CATL — the world's largest battery maker — announced last month it's building a lithium hydroxide plant in Zimbabwe's Masvingo province. Capacity is 50,000 metric tons per year, which is roughly 10% of China's total current output. That is not a pilot project. Luna: That's massive. And Ganfeng, the other big player, is doing something similar in the DRC — they're retrofitting an old cobalt refinery near Lubumbashi to process lithium. Lucas: Right. And the DRC move is smart because it diversifies away from Australia, which currently supplies about half of the world's lithium. If Australia ever joins a us led critical minerals alliance that restricts exports to China — and there's been talk of that — Beijing would have a hedge. Luna: It's almost like creating a parallel supply chain. One that's less vulnerable to geopolitical disruption. Lucas: Exactly. Now, there are risks. Infrastructure in Zimbabwe is shaky — power outages are common. And these refineries need a lot of reliable electricity. Some of these projects include plans for solar farms, but that adds cost and time. Luna: And there's the political risk. Zimbabwe's government under Mnangagwa has a history of changing mining rules mid-stream. Remember the 2022 ban on raw lithium exports? That was a surprise. Lucas: It was. And the DRC is about to hold elections that could shift policy. But Chinese firms are used to operating in volatile environments — they've been in Africa for decades. The difference now is the scale and the sophistication of the processing. Luna: So what does this mean for the global lithium market? Prices have been under pressure — lithium carbonate fell below 90,000 yuan per ton in Shanghai this quarter. Will African supply flood the market? Lucas: Not immediately. These refineries take two to three years to ramp up. But by 2028, Africa could account for 15 to 20% of global refined lithium capacity. That would challenge Australia's dominance and potentially lower prices further — which is great for EV makers, but tough for miners. Luna: And for China's own lithium refiners back home — they face higher costs for environmental compliance. African refineries might operate with looser rules. Lucas: That's an underappreciated angle. China's domestic environmental standards have gotten stricter. A refinery in Jiangxi has to spend heavily on emissions control. In Zimbabwe, the bar is lower. So the cost advantage compounds. Luna: It's almost like Chinese firms are exporting their pollution along with their capital. Lucas: That's a fair critique. And it's something local communities and NGOs are starting to push back on. But for now, the money is flowing. And the Chinese government is encouraging it — through the central bank's lending facilities and through trade agreements that include lithium in bilateral deals. Luna: And it's not just lithium. We're seeing similar moves with cobalt, nickel, and copper. The whole critical minerals strategy is being built outside China. Lucas: Which brings us back to the yuan question. If these refineries sell their output in dollars, China still needs dollars to buy them. But if China can convince African countries to settle in yuan — and we've seen small steps toward that — then the strategy gets even more powerful. Luna: That would take years. But you can see the blueprint. Lucas: You can. And speaking of blueprints — you know, this kind of deep dive is exactly why a small group of listeners chips in monthly through buy me a coffee dot com slash fexingo. It keeps this show ad-free and lets us spend time tracking these deals. Luna: Yeah, it's a pretty direct way to support the work. If you've found the analysis useful, that's how it stays sustainable. Lucas: Right. So back to the lithium map — one more deal worth watching. Last week, a smaller Chinese firm called Yahua Group signed a memorandum of understanding with Namibia to build a lithium sulfate plant near Walvis Bay. That's a new territory for Chinese lithium processing. Luna: Namibia has a good logistics advantage — deep-water port, political stability, and it's closer to European markets than Zimbabwe is. That could become a key hub. Lucas: Exactly. And if you step back and look at the pattern — Zimbabwe for the ore, DRC for the cobalt tie-in, Namibia for the port — it's a coordinated network, not a random scatter. The Chinese state is effectively redrawing the lithium map of Africa. Luna: And with that, they're also redrawing the competitive dynamics of the global battery industry. It's a long game, but it's playing out right now. Lucas: It is. And we'll keep watching as these refineries break ground. That's all for this episode of China Economy with Fexingo. I'm Lucas. Luna: And I'm Luna. See you next time.