China-US battle for African influence shifts to green critical minerals

·8 min read

As the US and China wrestle for influence in Africa, their next big battle is taking shape - for control of the continent's vast supply of the essential minerals used in electronics and batteries for electric vehicles.

Tanzania is building a critical minerals processing facility with US backing, as Washington courts resource-rich African nations to help break its dependence on China for the essential supplies.

US Vice-President Kamala Harris said work was already under way on what would be the first facility of its kind in Africa. She was speaking at a meeting with Tanzanian President Samia Suluhu Hassan as part of her week-long African tour that started in late March.

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Harris said the plant, based at the Kabanga nickel project in northwestern Tanzania, would deliver battery-grade nickel to the United States and global markets by 2026. The Kabanga mine is said to hold 44 million tonnes of nickel, copper and cobalt.

"Importantly, raw minerals will soon be processed in Tanzania, by Tanzanians. It will help address the climate crisis, build resilient global supply chains, and create new industries and jobs," she said.

US Vice-President Kamala Harris and Tanzanian President Samia Suluhu Hassan meet the press in Dar es Salaam. Photo: AP alt=US Vice-President Kamala Harris and Tanzanian President Samia Suluhu Hassan meet the press in Dar es Salaam. Photo: AP>

The White House said the arrangement was struck through the Partnership for Global Infrastructure and Investment (PGII), a US$600 billion package adopted by the Group of 7 nations last year at Washington's urging, in a bid to counter China's influence in developing countries.

According to the White House statement, the US helped to facilitate a strategic partnership between Kabanga mine owners Lifezone Metals and TechMet, a critical metals company part-owned by the US government through the International Development Finance Corporation (DFC).

Lifezone Metals, which develops the raw materials for EV batteries, acquired the Kabanga nickel project in 2021, after former president John Magufuli's administration revoked the licence held by its previous owners - Barrick Gold and Glencore - in 2018.

The Tanzanian mine agreement follows a memorandum of understanding signed last year by the US with the Democratic Republic of the Congo (DRC) and Zambia, to help them establish new supply chains for EV batteries.

Washington acknowledges its blunder in standing by while Chinese interests have dominated the mining and processing of critical minerals. The latest moves are intended to reduce US reliance on China for the resources.

China controls most of the market for processing and refining of cobalt, lithium, nickel, manganese, graphite, rare earths and other critical minerals vital for the world's transition to green energy.

Demand is set to increase exponentially for the resources, which are used in solar panels and wind turbines, as well as electric vehicle batteries and even military weapons.

Critical minerals are essential for the world's transition to green energy, with demand set to increase exponentially as carmakers increase electric vehicle production.

Christian-Geraud Neema, non-resident senior associate with the Centre for Strategic and International Studies (CSIS) Africa programme in Washington, said the agreement with the DRC and Zambia had heralded a change of approach by the US.

In a recent CSIS commentary, Neema said the pact - signed in December during the first US-Africa Leaders' Summit held in Washington since the Obama administration - "signals the Biden administration's willingness to act and reduce dependence on China as much as possible".

"The United States is making a step towards a rather concrete approach by addressing the economic and industrial needs of the DRC and Zambia, countries which had recently signed a bilateral agreement to build electric batteries for EVs," he said.

The DRC is by far the world's largest exporter of cobalt, accounting for about 70 per cent of global production. It is also rich in diamonds, gold, copper, tin, tantalum and lithium, as well as the largest copper producer in Africa.

Zambia is rich in copper and cobalt. Chinese companies have made massive investments in both countries, with China sourcing 60 per cent of its cobalt from the DRC.

While China's relationship with the DRC is arguably indispensable, President Felix Tshisekedi's government believes it may be getting short-changed by foreign mining firms and is investigating contracts signed during the previous administration.

The DRC formed a commission last year to determine and assess mineral resources, as well as proven and probable mining reserves, at the Tenke Fungurume Mining copper and cobalt project, majority-owned by CMOC Group Ltd, previously known as China Molybdenum Co Ltd.

The US could be the invisible hand behind the DRC mining contracts review, according to Neema's CSIS commentary. He said Washington had pushed Tshisekedi to revise the country's previous deals with China, citing the Sicomines contracts signed under former president Joseph Kabila.

"So far, the move has not been able to bear tangible results, much to Washington's dismay," Neema wrote.

Other Chinese companies operating in the DRC include Huayou Cobalt, Chengtun Mining Group, Wanbao Mining, and China Nonferrous Metal Mining.

China has also made inroads into Zimbabwe, which is estimated to have Africa's largest unexploited reserve of lithium - the key raw material in electric vehicle batteries - and last year imposed an export ban on the metal in its unprocessed form.

The move was part of Zimbabwe's efforts to have lithium processed locally, although analysts said the ban would only benefit companies already operating there, which are predominantly Chinese.

Three Chinese companies - Zhejiang Huayou Cobalt, Sinomine Resource Group and Chengxin Lithium Group - have recently acquired lithium projects in Zimbabwe worth a combined US$679 million. Huayou Cobalt and Chengxin Lithium are already developing processing plants.

"The reality of it is, this just took competition out of the market, and made it such that no new companies or countries can come in and invest," said Will McDonough, co-founder and CEO of asset manager EMG Advisors.

"It made it such that any artisanal mining that has occurred now only has few buyers and will be limited in what they can sell those metals for, because there is no free market."

McDonough said the biggest geopolitical and global macro issue of the next 10 or 20 years would be the control of critical minerals or battery metals, with Africa a key battleground.

"Our world saw first hand that dependence on Russia for our oil and gas is not a safe or sound plan," he said.

"We cannot allow China to become the Opec of lithium, copper, cobalt and nickel, or else any future development of this green energy capacity will be completely dependent on their permission and price creation, which isn't good for free trade or innovation - but is sadly the reality we all face."

Chris Berry, president of ­commodities advisory firm House Mountain Partners in New York, said it would be years - perhaps a decade - before the US had a chance of achieving a battery mineral supply chain that did not "touch" China in any way.

"China controls too much of the battery supply chain currently, specifically mineral refining, to think that Western markets can be truly independent of Chinese influence," Berry said.

Legislation - like Washington's Inflation Reduction Act could help - but was not an overnight fix, he added.

With China already dominant in Africa, "the deals recently announced by Vice-President Harris and Secretary [of State Antony] Blinken are more of a geopolitical chess move to remind adversaries that the US will remain active on the global stage with respect to the buildout of next generation supply chains", Berry said.

"Companies are likely to have more of an impact by building supply chains closer to home in North America to serve the large consumer market and also take advantage of the benefits from the Inflation Reduction Act."

David Shinn, a specialist in China-Africa relations at George Washington University's Elliott School of International Affairs, said that ultimately US companies would base their decisions on the bottom line.

While government agencies like the DFC could give incentives for US firms to engage in the mining and production of African critical minerals, private companies would do so only if they concluded it was likely to be profitable, he said.

Shinn said China's state-owned companies (SOEs) would take greater risks - especially when directed by the government or the ruling Communist Party - and even absorb losses on investments that affected key Chinese security interests.

"Chinese SOEs also have easier access to government financing than do American private companies," he said.

But US companies could offer higher environmental standards - an important consideration in the mining and production of these minerals - and might also be willing to transfer more skills to their African counterparts, Shinn said.

"Competing with China on this issue will be a major challenge for American private companies, but it can be done. The Biden administration has clearly made this a priority."

This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2023 South China Morning Post Publishers Ltd. All rights reserved.

Copyright (c) 2023. South China Morning Post Publishers Ltd. All rights reserved.