U.S. Officials Sound Alarm on China’s Lithium Oversupply Tactics
China’s aggressive lithium oversupply strategy aims to dominate the global battery market while undermining competition and driving down prices, according to a U.S. official.
Editorial Team (ET)June 29, 2025
China is intentionally oversupplying the global lithium market, driving prices down in an effort to eliminate competition, according to a senior U.S. official. During a visit to Portugal, a country with significant lithium reserves, Jose Fernandez, U.S. Under Secretary for Economic Growth, Energy, and the Environment, described the actions of the Chinese government as “predatory,” stating that the oversupply is a deliberate response to the U.S.’s Inflation Reduction Act, a $400 billion climate and energy investment package.
China’s Dominance in the Global Lithium Market
China currently controls about two-thirds of the global supply of lithium chemicals, a critical component in battery technologies used in electric vehicles (EVs) and other electronics. This stranglehold on lithium production gives China considerable power to manipulate global prices. Over the past year, lithium prices have dropped by more than 80%, largely due to overproduction from Chinese producers and a slowdown in demand for EVs.
The price collapse has had global consequences, forcing several lithium producers worldwide to scale back operations, lay off workers, and halt projects. Even within China, battery giant CATL has had to suspend production at some of its mines due to the unsustainably low prices. This demonstrates the far-reaching impact of China’s aggressive strategy to flood the market and lower costs.
U.S. Response and the Inflation Reduction Act
Fernandez expressed that China’s actions are intended to undercut the efforts of the U.S. to secure its lithium supply chain, which has been a key priority under the Inflation Reduction Act (IRA). The IRA is the largest climate investment package in U.S. history and aims to reduce reliance on foreign sources of critical minerals like lithium. By lowering prices to unsustainable levels, China is not only making it harder for American companies to compete but also for countries like Portugal that are trying to develop their lithium industries.
“China is producing much more lithium than the world needs today, by far,” Fernandez said. He also emphasized that the low prices are preventing countries like Portugal from attracting the investment needed to scale their own lithium production. Portugal, which has Europe’s largest known lithium reserves, is poised to become a major player in the global market but is facing difficulty securing the necessary capital in the current market environment.
Portugal’s Struggle to Develop Its Lithium Industry
Portugal holds about 60,000 tons of lithium reserves, making it the largest producer of the metal in Europe. Traditionally, Portugal’s lithium has been used in ceramics, but the country is now seeking to expand into the battery market. Together with neighboring Spain, Portugal aims to develop a full lithium value chain, from mining and refining to battery manufacturing and recycling.
However, the artificially low prices created by China’s oversupply are making it difficult for Portugal to attract the investment needed to build out this infrastructure. Several mining companies in the country have been looking for financing and strategic partnerships to kick-start their projects, but many are struggling due to the current market dynamics.
Global Trade Tensions Intensify
The global trade environment surrounding lithium and green technologies is growing more tense. Europe, in particular, has been vocal about its concerns over China’s market practices. Just last week, the European Union announced its decision to move forward with tariffs on Chinese-made electric vehicles, citing unfair subsidies that allow Chinese companies to flood the market with low-cost products.
China, in response, has imposed anti-dumping measures on imports from the EU, including products like brandy. This escalation in trade tensions underscores the increasingly competitive and politically charged nature of the global race for dominance in green technologies like lithium-ion batteries.
Long-Term Implications for the Global Lithium Market
China’s strategy of oversupplying the lithium market is designed to weaken competitors and maintain its dominance in the global battery supply chain. However, this approach may have unintended long-term consequences. While it has certainly driven down prices, it has also caused financial strain on Chinese companies like CATL, forcing them to suspend operations at some mines.
For the U.S. and Europe, the challenge remains: How can they diversify their supply chains and reduce reliance on China for critical materials like lithium? The U.S. Inflation Reduction Act is a step in the right direction, but as Fernandez pointed out, it will take more than policy to counter China’s market manipulation.
Portugal and other lithium-rich countries will need to find creative ways to attract investment and build out their lithium industries despite the current low-price environment. Meanwhile, China’s actions are likely to continue drawing scrutiny from the international community as trade tensions around green technologies escalate.
