Highlights
- China systematically undermines Western mining companies by flooding markets with cheap minerals and leveraging state-backed production.
- Syrah Resources exemplifies the challenges Western companies face in competing with China's strategic mineral dominance, despite initial promise and technological capabilities.
- Economic realities favor China's long-term strategy of controlling global critical mineral supply chains.
- Decoupling from China's mineral supply dominance is becoming increasingly difficult.
China is still proverbially eating the West’s lunch when it comes to critical minerals, and it’s not even subtle about it. As Jon Emont detailed (opens in a new tab) in The Wall Street Journal on March 10, the latest casualty in this battle is Syrah Resources. This Australian company once seemed poised to help break China’s stranglehold on the global graphite market. It had the mine, the money, the technology, and even a lucrative contract with Tesla. But none of it mattered. As it has done before, China simply cranked up production, flooded the market, and drove prices into the ground, making it impossible for Syrah to turn a profit.
Is State support key?
Per the WSJ, this story keeps playing out. The U.S. government throws money at Western mining ventures in an effort to build supply chains independent of China, only for Beijing to undercut them at every turn. It’s not just graphite. Chinese producers have done the same with cobalt, nickel, and lithium—minerals and rare earths essential for electric vehicles, renewable energy, and national security.
Companies in the U.S. and allied countries simply cannot compete with China’s ability to ramp up production at a loss, a luxury afforded by heavy state support and control over vast mineral resources.
Buyers walk away
Syrah’s problems extend beyond market manipulation. In Mozambique, where its Balama graphite mine (opens in a new tab) is located, resettled farmers protested their displacement, shutting down operations. The Louisiana processing plant, meant to be a cornerstone of America’s push for battery independence, has yet to sell a single commercial batch of graphite anode material. Meanwhile, the Biden administration wavered on new rules that would have penalized the use of Chinese graphite, pushing the decision back by two years. That was enough uncertainty for potential buyers to walk away from Syrah, leaving the company’s future hanging by a thread.
Tesla opposed look at “dumping”
China, on the other hand, plays the long game. While the West makes plans, China methodically expands its dominance, refining and processing the world’s raw materials to the point where any attempt to decouple from its supply chains becomes a logistical nightmare. Even Tesla, which theoretically stands to benefit from a diversified supply, opposed efforts to investigate Chinese dumping, arguing that it relies on high-purity materials that, surprise, come mostly from China.
Aggressive industrial policies
There’s no easy fix here. Western mining companies are ill-equipped to operate in politically unstable regions, and governments are slow to enact the kind of aggressive industrial policies that China has mastered. This is particularly true in the West, where ideological blinders essentially make it more difficult to wrap the collective arms around the underlying, entrenched, systemic challenge in Asia.
And in the end, economic reality wins—buyers will go where the supply is cheap and steady, even if it means deepening their dependence on Beijing. Rare Earth Exchanges has uncovered multiple examples where U.S. corporations would rather find bargains and good prices than spend too much to prop up a nationalistic non-market edict. Syrah’s struggles are just the latest example of how badly the U.S. is losing this fight, and unless something changes, they won’t be the last.
“This is particularly true in the West, where ideological blinders essentially make it more difficult to wrap the collective arms around the underlying, entrenched, systemic challenge in Asia. And in the end, economic reality wins—buyers will go where the supply is cheap and steady, even if it means deepening their dependence on Beijing”.
However, will we see the era of feedstock premium pricing paid by endline manufacturers or bottom line gov’ pricing support arriving in the West? Will ‘incentives’ for western-based consumer purchases along with tariffs on goods produced ‘elsewhere’, also come into effect? Will we see the West and in particular endline manufacturers take a stand on ESG compliance and third-party verification (which all add to costs)? What will be the outcome over the next 4 years for the Trump Admin’ with the clear aim to generate an environment for US manufacturer focused on home shoring with all relevant supply chains within or friend shored? Will we see two huge consumer markets emerging with their own ‘requirements’ for endline manufacturer participation, supported by ‘selectively’ created supply chains. Last decade the answers were no but in 2025…? Open the popcorn metals retail investors and watch for those few metal (or focus is niche RE) value chain wannabees that likely will emerge, regardless of the level of outcome achieved to all the questions posed above. GLTA – REI