Low prices for critical minerals needed for the green energy transition, such as lithium, cobalt, and rare earths, are curbing efforts by the West to fight the dominance of China in this sector, according to the CEO of U.S. government-backed investment vehicle TechMet.
Oversupply and weak prices are dampening the cashflows of Western start-ups, making it more difficult for them to compete with China’s government-backed long-term investment strategy. For example, the price of lithium has tumbled by more than 80% since the beginning of 2023, while key rare earth neodymium has halved in the same period, mainly due to oversupply.
Both Europe and the United States are seeking to reduce their dependence on China, which supplies about 90% of global processed rare earths and two-thirds of processed lithium. However, the current market conditions are making it challenging for Western players to gain a foothold.
TechMet, which has a valuation of more than $1 billion and stakes in 10 companies, plans to use the market weakness to invest in more firms, including those involved in lithium and tin. The company is raising an additional $300 million, which it expects to finalize in the coming months.
Despite the tough funding environment, some funds may also have to support existing companies, as their cashflows have been reduced by the low prices. TechMet’s CEO, Brian Menell, stated that “some of our projects may need more investment from us than we expected because cashflows have been reduced by the low prices.”
The weak market for critical minerals is seen as a significant obstacle in the West’s efforts to counter China’s dominance in this strategic sector, as the Chinese government’s long-term investment approach appears to be more resilient to the current market conditions.