China Further Regulates Lithium Battery Industry

China has introduced draft regulations to further regulate its lithium battery industry in response to concerns about oversupply in world markets. Experts point out that, although concern over this issue has increased, Chinese battery production is expected to decline in the coming years.

The rise of lithium battery companies has led to a decline in battery and raw material prices, which has affected the profitability of Chinese companies in the sector. In addition, US Treasury Secretary Janet Yellen has criticized China for filling world markets with low-quality and low-cost batteries, especially in the energy sector. 

To address this problem, the Chinese Ministry of Industry and Information Technology introduced new regulations to ensure sustainable growth in the lithium battery industry. Among these rules, lithium-ion battery manufacturers are advised against building factories solely for increasing production capacity. Regulations also include minimum standards and ecological guidelines, and address concerns about projects in environmentally sensitive areas by recommending their closure or strict monitoring.

According to a BloombergNEF analysis in 2023, although Chinese battery production was sufficient to meet global demand, its manufacturing is expected to decline in the coming years. By 2030, China's global manufacturing capacity could drop from 80% to about 60%, while that of the United States and European Union could increase from 5% to about 15% each. This change is expected due to initiatives such as the Inflation Reduction Act and policies supporting energy transition commitments.

Chinese Lithium Companies in Mexico

Ganfeng, which is the world's third largest lithium producer, has sought to boost the lithium industry in Mexico. However, President Andrés Manuel López Obrador's nationalization policies have made the scenario uncertain. In early 2022, when Ganfeng bought Bacanora, the project was in a US$800 million development phase. The project was planned to start commercial production in 2023. However, in April 2022, President López Obrador’s initiative to reform the Mining Law was approved, granting the State exclusive control of the exploration and production of lithium. In addition, López Obrador’s announced that granted lithium concessions were cancelled.