China is projected to surpass Australia as the world’s leading lithium producer by 2026, extracting between 8,000 and 10,000 metric tons more lithium annually than its Australian rival, according to Fastmarkets data. This shift reflects China’s rapid expansion in lithium mining and refining capacity, fueled by its growing demand for electric vehicle batteries and renewable energy technologies.
While Australia currently dominates global lithium exports, accounting for nearly half of global production mainly from hard-rock spodumene mining, China has significantly increased its lithium reserves and production capabilities. Recent discoveries in western China revealed a spodumene-type lithium belt stretching 2,800 kilometers, estimated to contain between 6.5 million and 30 million tonnes of lithium, elevating China to the world’s second-largest holder of lithium resources behind Chile.
China’s lithium carbonate output surged to 450,000 tonnes in 2024, up from 300,000 tonnes in 2023, intensifying global supply and contributing to a lithium market oversupply that has pressured prices and forced some miners to halt operations. Chinese producers benefit from lower production costs between $8,000 and $10,000 per tonne compared to Australian producers whose costs range from $12,000 to $15,000 per tonne, allowing China to flood the market profitably despite price volatility.
Despite China’s growing resource base and production, Australia remains a critical player, particularly in lithium refining. Australia is expanding its capacity to process spodumene into battery-grade lithium hydroxide, a more valuable product essential for EV batteries. Major lithium miners in Australia, including China-owned Tianqi and US-owned Albemarle, have invested in refining plants to close the gap with China’s dominant refining sector, which currently accounts for 77% of global lithium hydroxide production.
The Australian government has recently tightened foreign investment rules to ensure that future lithium mining and refining projects align with national interests, potentially limiting Chinese influence in the sector. Nonetheless, Chinese companies have amassed significant stakes in Australian lithium operations, generating substantial dividends amid strong lithium prices driven by the electric vehicle market boom.
As global demand for lithium continues to evolve, the competition between China and Australia in mining and refining will shape the future of the lithium supply chain, critical to the transition toward clean energy and electric mobility worldwide.
