Chile Ramps up Lithium Exports to China as EV Market Heats Up

The lithium-ion battery supply chain runs through China and Latin America.

The world’s top two exporters of the raw material needed to make electric batteries -- lithium carbonate -- are Chile and Argentina, according to an analysis by Trade Data Monitor, the world’s top source for trade statistics.

But now the Latin American countries have been changing where they ship the material crucial to manufacturing electric vehicles. Increasingly, they’re sending lithium to China instead of other key markets like Japan, South Korea and the U.S., according to TDM. The reason is that the electric vehicle market is maturing, bringing the lithium battery supply chain along with it.

In the first five months of 2021, Chile led the world in exporting lithium carbonates. It shipped $297.2 million to trading partners, more than any other nation, including $132.9 million to China, up 113% from the same period in 2020; $96.8 million to South Korea, up 9%; $36.7 million to Japan, down 24%; and $11.2 million to the U.S., down 4.6%. Chile, a nation of 19 million, has abundant salt flats where lithium can be mined. It then needs to be processed into lithium carbonate. Around 80% of lithium processing capacity is in China. Volkswagen, BMW, Toyota, Honda and other world-class carmakers have all built plants to make electric vehicles in China. Only invented in the second half of the 20th century and later pioneered for mass production in laptops and camcorders, lithium-ion batteries are the linchpin of a booming new trade in electric vehicles. The size of the global lithium-ion battery market is expected to increase to around $120 billion in 2030 from $41 billion in 2021, according to analysts.

Even as prices slumped in 2020, forcing trade by value to decline, Chile and Argentina have increased exports by volume. For Chile, by volume, lithium carbonate exports increased 22% in the first five month of 2021, to 38 million kilograms, from 31.2 million kilograms over the same period in 2020. In 2020, Chilean exports of lithium carbonate increased 19% to 97.7 million kilograms. Argentinian exports rose 169% to 8.1 million kilograms. However, in the first give months of 2021, Argentina’s exports fell 33% by volume to 2 million kilograms. Governments around the world, concerned about climate change caused by carbon emissions, are pushing massive private investment in electric-powered cars. In the U.S. the new administration of President Joe Biden has promised policies that encourage Americans to buy electric vehicles. Beijing has ordered that 40% of cars in China be electric by 2030. General Motors, the giant U.S. automaker, has pledged to invent dozens of new electric vehicles, and only make EVs by 2035. It wants to catch up to companies like Tesla, the U.S.-based global leader, and Germany’s Volkswagen. Although EVs make up less than 5% of all cars on the road, it’s clear that Tesla Model S, Chevy Volt, and Toyota Prius Prime are the future of the industry.

In 2020, China exported $15.9 billion of lithium-ion batteries, followed by South Korea ($4.9 billion), Poland ($4.6 billion), and Germany ($3.5 billion), according to TDM. For China, that’s more control over the market than anything in the crude oil industry, where even the world’s top producers – the U.S., Saudi Arabia and Russia – all generate less than 20% of global production.

The biggest import market for electric vehicles is Europe, where use is encouraged by high gasoline taxes and incentives. The world’s top electric car importers are the Netherlands, Germany, Belgium, the UK, and Norway. To be sure, it’s not just cars and trucks. Power plants are also using battery technology. They’re used to store excess power and then redistribute it when there are spikes in demand. The technology is elementary: Lithium ions are transferred via a liquid from cathode to anode and back to cathode. But recent innovations have brought down production costs closer to those of petroleum-powered engines. The price difference between an electric engine and fossil-fuel engine is expected to decline to zero in the next five years, and by 2030, as many as one-third of cars on the roads are expected to be electric.

And although lithium production has raised environmental concerns, those are lesser than those posed by cobalt, in which the Democratic Republic of Congo, a war-torn country, dominates production and trade.

Israel High-Tech Sector Helps Diversify Exports

Like other Meditereanen and Middle Eastern countries, Israel has been diligently diversifying exports, and is now seeking out new markets for trade growth. Israeli manufacturing and logistic firms, and export promotion agencies and the government, have been finding new markets and opportunities, creating a pathway for Israeli companies to compete around the world.

The new mix means Israeli is no longer quite so dependent on exporting diamonds, nuts and dates, and services like security. (By value, it currently exports more than twice as much in services as in goods.) Thanks to new investments, the country of 9.1 million, which has a gross domestic product of around $400 billion, has ramped up exports of medical devices, and high-tech goods including processors, circuit boards and television parts, according to an analysis by Trade Data Monitor, the world’s top source of trade statistics. Israel has also boosted exports of organic chemicals, plastics and pharmaceuticals.

To be sure, Israeli is an established player on international trade markets, with a well-oiled logistics network of roads, ports and transportation hubs. In 2020, there were nine countries to which Israel ships at least a billion dollars a year of goods. The top markets for Israeli exports: the U.S., China, India, Netherlands, Belgium and Turkey.

What’s changing, TDM data shows, is that Israeli is no longer quite so dependent on a cluster of traditional exports such as diamonds, which in 2020 was still its second biggest export by value at $2.5 billion, fertilizers, and agricultural commodities such as dates and nuts.

The new wave of Israeli exports is being driven by high-tech companies. Shipments of electronics such as circuit boards, radar equipment and transmitters increased 15% to $2.9 billion in the first four months of 2021. The biggest markets for Israeli high-tech equipment over that time were the U.S., China, and India. Shipments of medical devices used for diagnosis, surgery and analysis increased 31% to $2.3 billion. Israel’s biggest market for these medical devices in the first four months of 2021 was the U.S., which bought $538.5 million worth, but the fastest-growing markets were in Asia and Europe. Shipments to China increased 68% to $414.4 million, and exports to South Korea rose 128% to $232.4 million. Impressively, Israel is now the world’s fifth top supplier of medical devices to South Korea, behind only U.S., Japan, China, and Germany. Exports of this gear to Germany increased 17% to $114.9 million.

Where else could Israeli companies find markets for medical devices? The world’s fastest-growing markets for these medical devices in 2020, according to TDM, included Ukraine (up 41% to $427.9 million); Argentina (up 38% to $471.7 million); and Chile (up 37% to $514.7 million).

Only a small fraction of Israeli exports go to South America. In 2020, around 35% of Israeli exports went to Europe; 31% went to North America; and 28% to Asia.

And Israeli still has a strong agriculture sector, but those exports are worth a fraction of high-tech shipments. In 2020, for example, Israel exported $235.7 million of dates; $59.9 million of avocados; and $27.8 million of guavas, mangoes And mangosteens. The biggest markets for these fruits: France, followed by Netherlands, UK, and Russia.

There are plenty of reasons for Israeli companies to be optimistic. Israeli exports of pharmaceutical products increased 44% to $740.6 million in the first four months of 2021, according to TDM. And in May, the Israeli government signed a free-trade deal with South Korea, and it’s negotiating similar arrangements with China, Vietnam and India.

Why Trade Statistics Show Risk of Inflation

Once again, China posted robust headline trade numbers in June, showing off its status as the world’s top power in the global trading economy. Total exports increased 32% year-on-year in June to $281.4 billion. For the first half of 2021, exports rose to 39% to $1.5 trillion. Overall imports in June increased 37% to $229.9 billion. For the first six months of 2021, imports rose 36% to $1.3 trillion.

But a portion of that increase is due to rising commodities prices, suggesting that the world is facing production and capacity crunches as it rebounds from the Covid-19 pandemic, according to an analysis by Trade Data Monitor, the world’s top source of trade statistics.

For example, Chinese imports of iron ore fell 12% year-on-year in June to 89.4 million tons. But by value, because of rising iron ore prices, they increased 72% to $16.8 billion. The same thing happened with copper imports, which because of price hikes increased 64% by value (to $4.1 billion), and only 5% by quantity (to 1.7 million tons). And coal, which increased 13.1% by quantity (28.4 million tons) and 57% by value (to $2.6 billion). The effects of these price rises are bound to be broad, rippling throughout the global economy, causing prices to increase for goods from iPhones to cars, and increasing risks of inflation in the U.S. and Europe.

The trade data shows other trends. The Covid-19 pandemic, while cementing China’s place as the world’s manufacturing titan, could have helped to push supply chains for lower-value goods to other countries, while allowing China to build up capacity for higher-value products. For example, textile shipments declined 22% to $12.5 billion in June, while motor vehicle exports soared 150% to $3 billion. Exports of high-tech products increased 24% year-on-year to $76.8 billion.

The pandemic is easing in most of the world, meaning that hospital and health care ministries are reducing their demand for medical equipment. In June, exports of medical and surgical equipment fell 19% year-on-year to $1.7 billion. Factory orders and business confidence have been increasing, especially in the U.S. Chinese steel exports increased 146% in June to $8.3 billion.

On the import side, China is still ramping up agricultural purchases, as it seeks to feed a booming middle class, especially with more protein. Imports of agricultural products increased 34% to $20.2 billion. For the first six months, China bought $108.1 billion worth, up 34% from the same period in 2020. Imports of grain increased 60% to $8.3 billion. Imports of high-tech products increased 30% to $72.3 billion. And, as factories roar back to life in China, they’re making bulk purchases of important pieces and parts. Imports of paper pulp increased 45% to $1.8 billion.

Overall, China's exports beat analysts’ expectations, despite recent outbreaks of Covid-19 and port delays due to increasing trade. However, Chinese officials warned that trade growth may fall off in the second half of 2021.

The European Union, led by German exports, is doing better than the U.S. at tempering its trade deficit with China. Exports to the U.S. increased 18% in June to $46.9 billion and imports increased 37% to $14.3 billion. Exports to the EU increased 28% to $43.1 billion and imports increased 34% to $27.7 billion. But there is no question that China’s main focus is increasingly the robust economies of Asia. In June, its exports to ASEAN countries increased 34% to $40.4 billion.

What are the Best Export Market for Latin American Firms?

For Latin American firms and officials, global trade seems divided into two big, rich markets: Asian developing economies led by China gobbling up commodities, and rich consumers in the U.S. buying manufactured goods.

This state of affairs has been shaped by two important forces: aggressive industrialization in Asia, and manufacturing outsourcing in the U.S. which led to NAFTA and the USCMA trade deals between the U.S., Mexico and Canada.

For Latin American firms, the question now is where they might find opportunities in both these markets, and to a lesser extent, in the EU, for higher-value products. The challenge can appear daunting. Latin American firms outside Mexico have struggled to find markets in the U.S., and Latin American manufacturers have had difficulties overcoming China’s trade barriers and shipping costs. Consider this: In 2020, Brazilian car factories earned more in Cuba than in China. As with companies in the U.S. and Europe, China has not fulfilled the promise it made to become an enthusiastic consumer market when it joined the World Trade Organization in 2001.

However, there are niche markets where Latin American firms have the potential to expand in the U.S. and China, according to an analysis by top trade statistics firmTrade Data Monitor. These include Argentinian wine, Colombian cut flowers and Brazilian chemicals.

Trade routes from Chile, Peru and Brazil to China have become some of the world’s essential arteries, ferrying copper and iron ore to erect buildings, soybeans and meat to feed people, and gold to lubricate the economy. Total trade between China and Latin America soared to $315 billion in 2020 from $18 billion in 2002. In 2000, China was a niche destination for Latin American firms, ranking 16th among Brazil’s markets for exports.

Of the $165 billion China imported from Latin America in 2020, 35% was iron ore, 17% soybeans, 12% fuels, 7% meat, and 6% copper. China’s $150 billion in exports to the region included electrical machinery, 23%, appliances, 16%, and motor vehicles and parts, 6%. But Latin America’s reliance on its commodity exports to China poses risks.

In 2020, for example, China bought $18.5 billion of iron ore from Brazil, up 37% from 2019. Its second biggest market, Malaysia, at $1.7 billion. Five of Brazil’s top ten iron ore markets are in Asia. Overall, in the first five months of 2021, China was easily Brazil’s top market, accounting for $36.9 billion in shipments, over a third of a total of $108.6 billion in exports.

During the first quarter of 2021, Mexican firms exported only $2.2 billion worth of goods to China, out of $111.2 billion. Argentina exported only $842.3 million to China. Colombia did a bit better, shipping $914.3 million out of $8.9 billion.

China’s purchasing power has been accompanied by a diplomatic push. It’s signed bilateral deals with Argentina, Chile, Ecuador, Brazil, Mexico, Peru and Venezuela.

But what else is China buying from Latin America? Hint: It’s not cars. Brazil shipped only $2.3 million cars to China in 2020, less than the $2.6 million worth it exported to Cuba. Its biggest market is Argentina, which purchased $958.4 million worth.

There are reasons that it’s so difficult for Latin American firms to export to China. Market access barriers are notoriously difficult to handle. The world’s biggest manufacturing chains are in Asia. Six of China’s top 10 suppliers by value are in Asia. The others are the U.S., Brazil, Australia, Germany and Russia.

One sector that is promising for Latin American countries in China and the U.S. is food and wine. In 2020, for example, China imported $279.4 million of seafood from Argentina and $148 million from Peru. In 2020, Argentina exported $221.5 million of wine to the U.S., and $23.1 million to China.

In the U.S., opportunities for Latin American companies are dominated by firms based in, or connected to, Mexico. In 2020, total U.S.-Mexico trade totaled $175.3 billion, more than all other Latin American countries combined. The next best Latin American country was Brazil, in 16th place with $19.9 billion in total trade with the U.S.

In 2018, the U.S. started a scheme called America Crece, which aims to facilitate investment in Latin American countries to compete with China’s so-called Belt and Road Initiative, which 19 countries in Latin America and the Caribbean have joined.

One promising high-value sector is chemicals. In 2020, Brazil exported $4.9 billion worth of chemicals. Its second biggest market after Canada was the U.S., where it shipped $797.5 million. China was its eighth biggest market, importing $133.7 million. Another is cut flowers. In 2020, Colombia shipped $1.1 billion of cut flowers to the U.S., representing 80% of its total exports.

Can a Booming Global Economy Go Green?

As the world emerges from the Covid-19 pandemic, China, the U.S., and other top economies are renewing their commitments to green energy.

The world's nenewable energy capcaty increased by 45% in 2020, the largest increased in over 20 years, according to a recent report by the International Energy Agency.

The growth was driven by a 90% jump in global wind capacity, and a 23% rise in solar.

The challenge, as the case of China illustrates, is to allow countries to pursue prosperity for their citizens, while contining to invest in green energy.

The country is likely to succeed in many areas but fall short in others, because, quite simply, it must continue to power gigantic economic expansion, according to an analysis of import and export figures by Trade Data Monitor, the world’s top source of trade statistics.

China’s government has mandated a robust expansion of renewable energy capacity. It is part of a global trend, driven by subsidies, mandates and other policy tools. Global renewable energy capacity increased by almost 280 gigawatts in 2020, the largest year-on-year increased in the last decade, according to the International Energy Agency.

Between 2021 and 2024, China will account for 40% of new renewable energy capacity, the IEA said. China added 92 gigawatts of renewable capacity in the fourth quarter of 2020, triple what it added in the fourth quarter of 2019. The fourth quarter saw a period of robust growth because of policy deadlines in key markets related to targets set by the 2015 Paris Agreement.

However, China’s industrial and manufacturing economy covers such a wide swath of activity that it will always need to consume large amounts of resources, some of which will inevitably be harmful for the environment.

A classic example is steel, of which China is by far the world’s largest producer. A key ingredient in making steel is coke, which is made from metallurgical coal, a high-grade form of carbon. In the first quarter of 2021, for example, China increased coke imports over 250%, to $192.2 million, from $52.5 million in the first quarter of 2020, and $6.8 million in the first quarter of 2019.

Despite China’s industrial dominance, greening the economy is a central goal of Beijing’s 14th Five-Year Plan, which covers 2021 to 2025. "High-energy consumption and high-emission projects that do not meet requirements must be resolutely taken down," Xi Jinping, general secretary of the Communist Party of China (CPC) Central Committee, told party leaders recently.

And, in pursuing green energy, China has an advantage on the U.S. and Europe, because it is home to so many of the world’s biggest makers of equipment needed to produce renewable energy. China owns five of the world’s six biggest makers of solar panels, and the globe’s top wind turbine manufacturer. China is set to dominate offshore wind markets in 2021, according to the IEA.

The country is the heart of the world’s solar panel supply chain. Chinese imports of solar panels and related equipment increased 40.5% to $7.5 billion in the first quarter of 2021, and Chinese exports of solar panels increased 41.6% to $10.2 billion over that time. For all of 2020, Chinese shipments of the kind of turbines used to power windmills increased 9.5% to $4.5 billion [of exports]. Much of this production, of course, is sold domestically instead of exported.

But China’s biggest challenge besides its large heavy industry is that it is simply growing richer. That means more cars, more computers, and more homes to light. For example, in April 2021, imports of cars and trucks more than doubled year-on-year, rising 154.1% to $5.2 billion.

Overall Chinese imports in April increased 43.1% year-on-year to $221.1 billion, the biggest jump since January 2011. As the global economy recovers from the Covid-19 pandemic, it is a sign that China will play a leading role. Meanwhile, China’s factories are still ticking. Exports in April increased 32.3% year-on-year to $263.9 billion. That bettered predictions by analysts of around 25% and surpassed the 30.7% growth registered in March. With Europe and the U.S. still recovering from Covid, China is also expected to maintain its dominance on global export markets.

All that economic activity needs power, and China has continued to build coal-fired power plants. In 2020, despite the Covid-19 pandemic, Chinese coal imports increased 3.6% to 204.1 million tons. A country always has to keep the lights on.