Spotlight on Highly Contested Resources

Lithium and cobalt have a wide range of industrial and commercial uses, with batteries for portable electronics and electric vehicles driving increased demand in recent years. In the coming years, the electric vehicle (EV) industry, in particular, will continue to push demand for both minerals. According to McKinsey’s Future Mobility Initiative, global EV production is expected to reach as high as 13 to 18 million units by 2025, a 200 percent increase from 2018 levels. Based on the U.S. Geological Survey’s most recent data for global production, that means lithium production will have to increase 50 percent and cobalt by 60 percent by the year 2025 to meet demand. China’s 2017 EV sales were up 53 percent from 2016, and the nation’s pollution-reduction policies aim to continue this trend. For perspective on how this may influence demand, a typical smartphone contains 5 to 20 grams of cobalt, while an EV needs between 4 to 30 kilograms. China and the United States are likely to increase imports of cobalt and lithium to meet this escalating demand. The United States does produce some lithium at home, though the exact amount is proprietary, and there’s modest potential for growth with additional, untapped reserves. China produces some lithium at home, as well, and could potentially be producing more, given the estimated size of its reserves. Nonetheless, both countries import more than 50 percent of the lithium they currently consume, mostly from Argentina and Chile, where China has significant investments in lithium mines.

As for cobalt, 82 percent of China’s total supply comes from the Democratic Republic of the Congo, the largest producer of cobalt ore. Yet China is increasingly integrating itself as a critical step in the cobalt supply chain, investing in cobalt mining in the DRC and processing domestically.¹ China now possesses over half of the world’s cobalt refinery capacity. The United States primarily imports refined cobalt, and looks to Norway (14 percent), Japan (9 percent), and China (9 percent) for its supply (note that the cobalt did not originate in these countries).

Niobium’s primary use is in producing stronger, less corrosive, and more heat-resistant steel for everything from jet engines and rocket subassemblies to superconducting magnets for MRI machines and smartphones. Niobium production is highly concentrated in Brazil, with Canada being the only other significant global producer. Geologically, niobium is fairly rare, especially in economically recoverable concentrations, and Brazil will continue to dominate world supply. Both China and the United States import niobium for electronics and related technologies, as well as for steel alloys.

The United States is the world’s largest soy producer, followed by Brazil and Argentina. China, the world’s largest consumer, domestically meets 13 percent of demand, and imports the rest from the United States, Brazil, and Argentina.

While the soybean is native to China and remains a cornerstone of the Chinese diet, it is the rising demand for meat among China’s growing middle class that is pushing up the demand for soy as animal feed, beyond what the domestic supply can meet.

Given China’s political emphasis on agricultural self-sufficiency, its dependence on imports for a native crop is striking. With only 9 percent of the world’s arable land to feed 21 percent of the global population, it would be a challenge for China to increase domestic cultivation by much.

The United States owes its status as a soy powerhouse to China. While U.S. soy production increased steadily in the latter half of the twentieth century, it skyrocketed only when Chinese demand took off in the mid-1990s.

The high-volume, high-value international soy market is vulnerable to disruption, including from weather. In 2010, global soy production dipped when Canada experienced a wet summer, while Brazil and Argentina suffered a drought; the price of soy increased nearly 50 percent. Climate change will increase the frequency and severity of such extreme weather, so erratic changes in the price of agricultural goods on international markets may become more common.

Palm oil consumption is rapidly growing. It now accounts for a third of vegetable oil used globally, replacing hydrogenated vegetable oil and butter in processed food, and is used in a wide variety of other products, such as cosmetics and shampoos.² Palm oil-derived biofuel consumption has also increased as governments race to displace greenhouse gas emissions and issue biodiesel use mandates. Palm oil production is heavily concentrated, with Indonesia and Malaysia as the most prominent global suppliers. As neither America nor China produce palm, both countries rely overwhelmingly on Indonesia and Malaysia to fulfill demand.

Increasing the land devoted to palm oil production has consequences, however. Palm grows best in the same climate as tropical forests. Since 2000, the land area devoted to producing palm has increased by 125 percent, which has resulted in a pushback from local communities and international organizations due to associated deforestation, air pollution from land-clearing fires, and resulting greenhouse gas emissions. Worryingly, other countries, including Brazil, are looking to increase palm production, putting tropical ecosystems at risk.