Decoding China’s mineral moves | Fast Forward podcast season 2, episode 8 transcript

Full episode transcript

Fast Forward, season 2, episode 8 transcript 

Andrea Hotter [AH]: Welcome to Fast Forward by Fastmarkets, the podcast that cuts through the noise in commodities and critical minerals. I’m Fastmarkets Special Correspondent Andrea Hotter, and we aim to bring you sharp insights, fresh ideas and big conversations with the people shaping markets today and tomorrow. Will Adams, my friend and colleague, is here with me again today. Hi Will. 

William Adams [WA]: Hey, hi Andrea. How are you doing? Alright? 

AH: Yeah, not too bad. Can’t believe we’re into September. And it’s been a very busy month so far with all of the events, right? It’s good to see you in Lisbon. 

WA: Yeah, I know. That was good. That was good. Good time. And interesting times as well, isn’t it? 

AH: Very interesting times. And I hope this conversation is going to be just as interesting. The idea today is to explore how Chinese companies interpret and respond to the West’s attempt to decouple from China in the critical mineral space. And whether the idea of de-risking from China is mostly political rhetoric or a real change in how deals are done. Our guest to do this today is Raj Surendran, who is the CEO of Tianqi Lithium Energy Australia. He’s based in Perth, Western Australia, and he’s got a deep background in finance, strategy and project development. He’s been vocal about Australia’s role in reshaping global lithium supply chains. And his company, as you’ll hear, is a really good example of a bridge in dialogue between Chinese, Australian and Western strategic positions. So shall we hear what he had to say? 

WA: Yes, let’s listen. 

AH: So Raj, it’s great to be with you. Thank you for joining us today. 

Raj Surendran [RS]: Thanks for having me, Andrea. And it’s great to see you again after such a long time. 

AH: I know we’re literally on the opposite side of the world to each other right now, you in Perth and me out in the US. So this is a big topic and I am so interested to hear your thoughts. Let’s dive in and just set the scene a little bit to give some context. Your company, Tianqi Lithium Energy Australia, straddles these two worlds. It’s kind of the proverbial love child of Chinese and Australian parents. I’m going to call it by its initials TLEA from now on. 

So when you hear Western leaders talk about decoupling from China, which is a frequent narrative these days, what do you think that they actually mean? What does decoupling mean or sound like from your perspective? 

RS: Look, when I hear talk of decoupling from China, look, I understand and accept the strategic intent behind that, right? Governments in general want to ensure resilience in their supply chains, especially for vital industries such as the energy storage, electric mobility. I guess from our vantage point, it does sound like a call to unwind decades of collaboration, innovation and mutual benefit, which has been existing for as long as I know. Right. So I guess in our industry decoupling is not just a geopolitical concept, it’s a practical challenge. 

The demand for a clean energy solution is global and meeting the demand requires cooperation across the continents. And like you said, Andrea, TLEA sits right at that intersection of the two economies which are deeply intertwined, particularly in the critical mineral space. In the lithium and sort of broader critical mineral space, supply chains are definitely globalized and interdependent. But I think our joint venture, like you pointed out, is proof that Australian, Western and Chinese companies can work together transparently, sustainably and with a shared purpose. 

AH: For sure. It’s a really interesting one because I always think about it, you know, what is the intent behind it? Is it about securing supply or is it about limiting China’s influence? Which one do you think it is? Or could it be a combination of both? 

RS: I think it’s a combination of both. And I think a lot of people share that as well. I think there’s legitimate concern over the over-reliance on any one country for critical input. I get that, especially in sectors tied to national security and the energy transition. And this was very apparent during COVID-19, obviously. COVID-19 sort of exposed the vulnerabilities in the global supply chain. And since then, just about everyone wants to correct that going forward, particularly in the area of critical minerals. So diversification, resilience, transparency, all part of that conversation. And as an organization, we support that goal, I guess, wholeheartedly. But there’s also a geopolitical dimension to all of this. Decoupling is not just about where the materials come from. It’s also about who controls, as we know very well, the technologies, the infrastructure and the strategic levers of the economy. So, I guess in that context, limiting China’s influence is clearly part of the solution for some of these Western policymakers. 

AH: That gives us a really great kind of overview of what you think maybe the intent is. So I guess the bigger question is from where you sit, are these policies actually working or is this decoupling idea mostly a political talking point? And then I wonder, is it even possible to do it in commodities as well? Because decoupling is very different from diversification as well. 

RS: That’s very true. And I think that the challenge is that those two goals, like you said, don’t always align, right? So pursuing, I think in my mind, supply security should be about resilience and diversification, not exclusion. Right? So if the intent is to shift too far towards limiting China’s role, then we risk, I think, undermining the very resilience that we’re trying to do. I think in commodities, decoupling is incredibly difficult. Diversification definitely can happen, but full separation comes with quite massive disruption, certainly inefficiencies and let’s not even start to talk about the cost of doing it. So commodities by nature are globally traded. They follow geology, not ideology. 

You can’t relocate a lithium deposit based on a foreign policy or a new policy that’s being crafted at the moment. 

The processing infrastructure, the expertise, the downstream integration is all, like my company, deeply interconnected. It traverses multiple borders and that’s the difficulty in trying to decouple. So while governments may talk about decoupling, and that’s really, I think, to signal a strategic intent as well. What we really think is a shift towards de-risking and diversification. And I think you’ll hear me say that multiple times tonight. And it’s important to remember that takes time. And even just with the plant that we have, building it in Australia, completing that construction, ramping that up, trying to get up to nameplate capacity is proving to be challenging because the Western world is not quite set up for this decoupling as yet. And that’s the realization. So it takes time, it takes money, takes expertise and certainly that patient capital to make that happen successfully over the long term. 

AH: I really like that geology, not ideology. I think I’m going to start using that. It’s definitely appropriate. That’s a really good framing for it. It comes in contrast to a lot of the Western narratives, which often frame China’s role in critical minerals as a risk and a threat. What’s the most common misconception that you see out there in this whole story? 

RS: I think the biggest misconception is that China’s dominance is purely a function of control or coercion, I think. China was very strategic and has been very strategic for a long time, right? They’ve been very patient, and they have definitely had the foresight to build these processing capabilities that we see now that it’s sort of dominating. I mean, it’s done that and it’s possessed that for decades. It’s fine-tuned it, it’s perfected it and it’s paying off. I did not happen overnight and certainly did not prevent, you know. The important thing is we talk as if China has done this behind closed doors and has prevented everyone else from doing it. They’ve not prevented that same development happening anywhere else in the world. Countries just chose not to do it. So the reality is China’s dominance is the result of decades of strategic industrial policy, investment in the midstream capacity and development, and a willingness to take on the environmental and economic cost of refining. 

While countries like Australia focus on extraction, you know, that ‘dig it and ship it’ sort of mentality, China has built the value chain that everyone else is now trying to replicate. So when people talk about China’s monopoly, they often, I think, misreading the risk. It’s not about who owns the mine, it’s about who owns the means to transform the materials into strategic assets. That’s a very different kind of leverage. So as we look to diversify and de-risk the supply chains, I think it’s critical to understand that nuance. Building new mines is one thing, but building that processing capacity, the technical expertise and the downstream integration, that’s where the real challenge lies. And I think this is where countries like Australia, America, Canada, will come to realize. And certainly, our experience gives truth to that. 

And just before I finish I think another common misconception, sorry Andrea, I think another common misconception is that Chinese firms do not adhere to global standards. In our case, we are majority Chinese-owned. We operate in Australia. We’re subject to some of the world’s most rigorous ESG and governance frameworks. And our parent company, TLC, is wholeheartedly behind us meeting and adhering to that governance, right? So I think that narrative often overlooks a diversity within Chinese-linked operations and the role they play in enabling this energy transition. 

AH: Yeah, I wanted to ask you about the ESG side of things at some point, but that’s very relevant and it is a reframe we hear a lot as well. So that gives us a great sense of the big picture politics. So let’s dig a little bit now into the practical side. We said that TLEA is a Western and a Chinese joint venture. So in practice, have you had to adapt your strategy in response to these Western efforts to control critical mineral supply chains that we’ve just talked about, if at all? Have you been changing the way you do things? 

RS: That’s a really good question. So one of the most sort of tangible shifts in the current landscape for us has been the emergence of the regulations that restrict the use of critical minerals sourced from entities, the concept of FIOC, or Foreign Entities of Control, with more than 25% Chinese ownership. And unfortunately, TLEA falls in that bucket. So these measures, such as the IRA sourcing rules in the EU’s Critical Raw Materials Act, they are definitely reshaping how the supply chains and certainly how we operate and essentially dictate who qualifies as a trusted partner. Now you decide what that actually means. I’m not quite sure how you define that globally, but that’s definitely had an impact on how we think about market access and our strategic position. We’ve definitely had to pivot. We’ve definitely had to change. So what we’ve done is we’ve tried to broaden our market base. Whereas before we focused on sort of a couple of key markets, we’re now placing greater emphasis on regions like Southeast Asia, India, South Korea, as well as some European markets where demand is really strong and policy frameworks are more open to diversified partnerships, right. So I guess the benefits of these markets are that these markets are not just growing rapidly but they also value the kind of operational excellence and environmental ESG standards that we have here in Australia. So TLEA, as you and I have said, it blends all the Chinese private investment with Australian public ownership. We operate under the Australian law with Australian governance and our production meets and exceeds global benchmarks. So we’re able to offer high quality lithium product with full traceability and compliance whilst also navigating the geopolitical sensitivities with a great amount of trust and transparency. 

AH: Yeah. The diversification is forcing you to diversify as well. It’s really interesting. Do your Western partners and customers expect you to pick a side because that’s a really interesting one. How influential are they in your actions? 

RS: Look, I think there’s probably a certain amount of expectation that we would try to, given the quality of our product, we’ll be trying to do what’s required to meet the standards that are currently prevailing or being forced down on us. But I think the short answer is most of our partners or just about any of our partners haven’t verbally said to us that you’ve got to pick a side, but we know we’re facing some real commercial and geopolitical pressures that are not of any of our making. So this uncertainty around the global policy when it comes to the ownership structures, particularly involving Chinese investment, certainly hurts us. So, you know, when you think about it, Andrea, under current interpretations, TLEA, we are unable to supply lithium hydroxide to a company that plans to use lithium in batteries of vehicles destined for the US market, right? That means spodumene that comes from Greenbushes, the world’s largest and best quality hard rock mine that is actually located in Australia, is excluded from being able to participate in those sort of activities. It doesn’t really make sense. 

AH: So how does that work when 49% of Talison, which is the operator of Greenbushes, is owned by Albemarle, which is an American corporation? I mean, how do you manage that relationship there when you’ve got these political tensions? There’s obviously no firewall between the commerce and the geopolitics in that sense. 

RS: No, not really, right. So I think both shareholders of Talison, Albemarle being the 49%, I think we both accept that it’s not a commercial decision that’s driving this. It’s a regulatory constraint, right? It definitely puts companies like ours in a difficult position. So our joint venture, I guess, is built on that shared understanding and on the shared commercial goals, mutual respect and that relationship has been going on for the better part of 10, 11 years. So what we try to do is manage and control what we have control of. So we focus on the fundamentals of running that mine, which are about the safety, performance and delivery. We try to not let the external noise disrupt that internal shareholder alignment. But that said, we’re not naive. We both, I guess, monitor geopolitical developments closely and maintain open dialogue with our partners to ensure that we can continue to operate in a friendly, resilient and enduring manner. 

AH: I mean, that’s obviously on the US side, we know about the foreign entity of concern rules. When we think about just the broader Western market, again, it’s the rhetoric that companies want to avoid China-linked supply. In your experience, I know you said your customers haven’t said that to you. Do you think that they genuinely believe that or are they privately just quietly accepting that China is part of the chain? It’s very difficult to completely decouple and diversification is probably the best strategy. I mean, how do you navigate that? 

RS: It is a complex question, right. I’m not sure I can really speak on behalf of those companies. But what I do believe is that that question that you just asked goes to the heart of how global supply chains are evolving. Lithium, like many critical minerals, flows through that global ecosystem that we talked about. And that’s often with China at the very heart of that ecosystem. So while many companies might publicly signal a desire to decouple, and I guess maybe the answer for me, I think is that the reality is that there would have to be an acceptance that China-linked supply is still part of that chain until I guess all of these new non-China supply chains have been built and are operational. But even then, I don’t believe it would be entirely possible to decouple from the Chinese supply chain. For TLEA, being this majority Chinese-owned firm, this gives us quite a unique vantage point. We’re not a Chinese government entity. We are a joint venture with Australian public ownership, governed by Australian regulations and led by an Australian team. So at the end of the day, that should matter. I would hope it matters to companies, right? 

It means we can offer the quality and once again, the transparency and accountability that Western partners are expecting, but at the same time, we bring the scale and the expertise of our Chinese parent company. We’re clear about who we are, how we operate, and the value that we bring. And like most companies, we advocate for policy frameworks that should recognize the difference between state-owned enterprises and commercially governed joint ventures like ours, right. SO I guess ultimately, our goal is to be a trusted supplier. And that means building those bridges, not the walls, because the reality is I don’t believe any one country can deliver the types of supply chains that currently exist. Not for a very long time, not without a whole heap of investment. 

AH: So it sounds like, despite all the politics, there’s collaboration, there is real collaboration still working. Where would you say it’s working the best, or are there any examples you can give me through the work that you see? 

RS: Certainly, you know, those regions, those countries we’ve talked about, we’ve tried to broaden our customer base, they are genuinely after a good product. And the product that TLEA produces is a good product. It meets industry specs, we are quality accredited, we have undertaken product qualification, we have undertaken our customer audits, and we have come through this with flying colours. So they truly appreciate that. So they continue to look for opportunities to be able to purchase our product and use it in markets that are not impacted by the FUC routes. 

AH: We’ve talked a little bit about customers there. So let’s turn now maybe to a host government. So I know that you’re not dealing with thousands of far-flung countries. Do you notice a difference in how they approach Chinese versus Western investors? Do you kind of go in with a different hat depending on who you’re dealing with sometimes? 

RS: This is my personal observation being in TLEA. There is definitely a different approach or attitude towards TLEA as opposed to non-majority owned Chinese companies. I think that is definitely true for us. So I suspect that if you asked the different companies in this industry, they’ll all have different answers. But I think in the Western markets, there’s obviously a scrutiny on ownership, governance and any political alignment to Chinese firms, particularly those with state ties. So they are often viewed through a very different strategic lens, I guess, or strategic risk. So that means more due diligence, more compliance hurdles and sometimes exclusion from procurement or even financing opportunities or financing channels. And this is not our own experience. We’ve seen this with other companies here in Australia, particularly within the critical minerals sector, where a certain level of Chinese ownership can disqualify, obviously, a product from tax credits and certainly from the ability to invest in projects or companies that are deemed strategic or critical to that particular government. So yeah, there’s a definite difference in approach when it comes to Chinese companies. 

AH: We often hear concerns that China is locking up or dominating supply and that’s the big stick to get people to respond and create their own supply chains. How do you respond to that idea that China’s locking up supply? 

RS: I would say that’s not the case. I think, like I mentioned earlier on, China’s worked very hard to develop its industries, right? Over decades, it’s been very strategic in how it’s developed. It was not to know 20 years ago that other economies, other countries, other regions are not going to do the same. Right? So they’ve picked an industrial policy, they’ve picked a national development plan and they’ve gone down that path. And it’s now turned out that they’ve got that. Right. But I guess at the end of the day, there’s no doubt there are occasions and there are examples that people can point to where China has looked to lock up those and use that influence or that control to get a certain outcome for themselves. There’s no doubt. I can’t deny that. I wouldn’t want to deny that, but I think at the end of the day, often that behavior, that action is a result of pressures in other areas, right? You need two hands to clap. You’re not going to make any noise if there’s only one hand. So there’s always another side to this story as to every action ends up with some sort of reaction somewhere down the track. So I think it’s a bit hard to say that’s why China is doing that. You’ve got to understand and unpick what’s been the motivator or the driver of that. 

AH: Yeah, you know I was just recently in Angola out in Africa, and you’re talking there about China being very good at getting organised and driving investment into often mineral-rich countries that are capital scarce. They played a really big role in building infrastructure in those areas. Haven’t they? It’s not just the mining side of things.  

RS: Oh, absolutely. I in a previous life spent time in Mozambique and South Africa and I saw first-hand Chinese enterprise investment and involvement in the development, the building of key infrastructure. Airports, bridges, roads. So look, you know, the cynical side will say they doing that in order to get favours in mining projects and so on, but  ultimately, that’s how a lot of those, I guess, third-world countries are going to be able to move forward. Hey’re going to have tp be blw to give something up I order to get that development. So, you’re right. There;s not many countries in let’s say in Africa like Angola and Mozambique that haven’t been thr beneficiary of some significant Chinese infrastructure activities and investment. And they’re better for it. Those countries are better for it. At the end of the day, I think all of those countries over time have learned to deal better with how that relationship is built. Early days they were potentially maybe taken advantage of. But I think these days, there’s a real balance. They’ve got good advice. They know what they need to do, what they trade in order to get that, because they’re not going to be able to do it on their own. Often they’re not able to do it. 

AH: Yeah, no there was definately there was no co-towing to anybody. They were very savvy about whp they werr doing business with. Whoever they were, they had to meet certain criteria. So it’s definitely changed now I think.  

So those experiences shape your day-to-day strategy. So let’s zoom out a little bit and talk more about the industrial impacts, perhaps. I’m curious as to whether companies are actually moving trading partnerships or industrial capacity outside China or away from joint ventures. This is in the industry more generally. Has anything really changed, do you think? 

RS: Look, I don’t know if I know this firsthand, but you know, from what you read and from what you see and hear, I think it’s quite obvious. China, when those trade tariffs came in, was offshoring, not necessarily in critical minerals, but was suddenly offshoring, you know,  a lot of the manufacturing into countries like Vietnam and Thailand and other places, who ended up feeling the brunt of those tariffs in any event. So I think there’s definitely a move towards doing that, offshorining, that’s I think is the term they use. But the key thing to remember, Andrea, which I’m sure you are well aware of this and your listeners probably are as well, is that the Chinese industrial ecosystem is just unmatched in scale, in efficiency, and is not going to be replicated in a short period of time, right. So I think China doesn’t necessarily own the majority of the global resources, but it does control the refining, processing and manufacturing infrastructure that turns those raw materials into the usable products. So placing that capacity is a massive undertaking from a technical, financial and even environmental perspective. So yes, it’s happening, but it’s not going to happen in the scale that I think policymakers might want or hope for. 

AH: Yeah. And you mentioned there some of those operational obstacles that have emerged to stop us creating these non-China supply chains. I maybe wonder if you could go into that a little bit more. You talked about financing, obviously got the labour side of it, the feedstock, creating that scale. What are your thoughts on the operational obstacles? 

RS: I think for the Western world, the obstacles would often, and certainly for us in the seven, eight years that we’ve been through construction, and now operationally, often materializes in the form of feedstock security, permitting delays, financing, the skilled labor, that’s a big issue for us, not just building that skills, but retaining those skills, technology know-how, the transfer of that technology. We know there’s restrictions now on that. And that’s just to name but a few, right? 

The obstacles to building a non-China supply chain. It’s very real. It’s multifaceted and I think it is underestimated. Certainly here in Australia, there isn’t a full appreciation of the ecosystem that you need to have to support your critical midstream industry. Right? So building a minor processing plant outside of China always takes time. Without coordinated and enduring policy support and that patient capital that I’ve mentioned before, the workforce development, these alternative supply chains will continue to struggle. What I have seen in regional governments like Indonesia and India, they are getting that and they’re starting to put the building blocks in place that tries to deal with all of those issues, right? That could prevent them. So they are creating these big industrial areas, strategic areas. They are putting in the right infrastructure. They are fine-tuning their permitting processes in order to get projects through quicker, they’re bringing the financing in, they are co-locating all of those OEMs and vendors that they know are required to support the ecosystem. So they’re getting it. They definitely learned from China, and it’s starting to do that, but it’s all a matter of time, cost, and I guess the will to see it all through. 

AH: Yeah, absolutely. So we talked a little bit about the operational side. Let’s see if this political pressure is actually translating into creating impacts in financing contracts and pricing. So if you look back a couple of years, what’s the most concrete way that you think this Western rhetoric on de-risking has or hasn’t changed how you do deals? Are you seeing your customers or your partners asking for different contractual protections because of it? And without giving too much away, can you give me any examples, maybe a clause or a contract term or a route or a kind of a demand that you’re hearing more that you didn’t necessarily hear previously? 

RS: There has been a shift and certainly there’s been sort of different customer requirements. Certainly the technical specs of the product, that’s being enhanced and getting tighter and harder to sort of achieve, but that’s what the end customer requires. So we call them aspirational specs and we’re constantly looking at improving and meeting those specs. But I think to your question, I don’t think that that shift that we’re seeing has come so much from the political rhetoric as it has from the customer-driven expectations around traceability, that responsible sourcing, ESG compliance. So we’re seeing a growing emphasis on customers, particularly those linked to those regulated markets like the US and EU, wanting to ensure that every link in the supply chain is auditable, compliant and risk-free. That’s not just about where the lithium’s come from. It’s about how it’s mined, how it’s processed, how it’s contracted. So an example that you asked for, in a recent customer audit that we had, we were actually asked to revise our supplier contracts to include, this is our third-party supplier contracts, include clauses on responsible sourcing obligations, even though there’s no specific risk-based evidence through the audit to justify the change. So what we learned was a customer wasn’t necessarily reacting to an issue that they discovered during the audit, but they were, I guess, proactively trying to insulate themselves from any potential future exposures. So for them, it was about de-risking the entire supply chain all the way upstream to the mine. 

While we fully support the principles behind this responsible sourcing, this requirement has some real-world impacts, Andrea, as you would know, right? For us, they’ve introduced new layers of administrative complexity, operational oversight, financial costs. And that will be for every player along the supplier chain, because when we have that requirement placed on us, we’ve got to push it out to our suppliers, push it out to our source of all, Talison. So, you know, your compliance team suddenly starts to grow, your documentation requirements start to expand, contract negotiations get a little bit more complex and intricate, but you know, there’s no way around it because that’s the direction that the market is taking and heading. Then the trust and transparency become the real sort of commercial assets that we’re dealing with. 

AH: So Raj, it’s interesting you mentioned responsible sourcing. We hear a lot about premiums and I’m curious as to whether Western customers who say they want non-China supply are willing to pay a premium for it or do you think that costs still win? You’re talking about responsible sourcing there for your customers, you’re obviously producing a quality product. How does it impact you, the premium side of it etc, when you are obviously straddling that world of China and Australia still? 

RS: That’s a great question, Andrea. And once upon a time, naive Raj believed that customers would pay a premium for a quality product that meets global ESG standards. I think as I’ve mentioned to you before in your visits, our plant produces three by-products. We have found commercial uses for all of them. So whilst we’re not quite there yet in terms of full offtake of those by-products, certainly our intent is all of those by-products end up in a commercial use because from a financial perspective, that’s great for us, for a company. From an ESG perspective, none of those by-products are ending up back in the ground. So I guess the short answer is cost still wins just about every time, right? So there’s a theoretical premium for non-China supply, but it’s not sustainable. It depends on market conditions, customer priorities and the availability of alternatives. Buyers talk diversification, but I think you and I know at the end of the day, economics still drive the decisions, right? So I think that’s why it’s critical to build non-China supply chains that are not just ethical, but they’ve got to be competitive. And if they’re not competitive, well, I hate to think how successful it’s going to be. 

AH: That’s really fascinating, Raj. And I’d like to talk a little bit about perceptions and trust because beyond the economics, there’s also this human and reputational side. Do you feel that Chinese-owned firms are judged by different standards in the West compared to Western firms operating in China or when you’re dealing with Western buyers? 

RS: There’s definitely a difference, right, in how Chinese companies are viewed, what their intentions are. Are they state-owned? Are they privately owned? Even when they’re privately owned, there’s always this belief, often misplaced, that there’s a link to the Chinese government. TLC, my parent company, is dual listed. They’re listed in Shenzhen as well as in Hong Kong. So they have investors in China, as well as global investors, funds that hold equity in the company, I guess. So are they judged by different standards? I think that the short answer is yes, I believe that they are. Can I point to evidence? 

AH: Can you give me a story about…  

RS: No, I can’t. I wish I could. But you know, there’s some examples here in Australia, for instance. So a rare earth company recently, and I won’t name it, but they were actually forced to divest their ownership in that rare earth company because the Australian government deemed it as being critical. So there are definitely pressures on Chinese companies to do that. It’s a publicly listed company that had to divest. And so it’s not just about ownership, it’s about the control. But when you look at how Western companies are treated in China, yes, they face JV requirements, some opaque regulatory hurdles and political pressure, but they’re rarely forced to divest outright, at least not publicly anyway, not that we are aware of. So I guess, as we discussed before, Western buyers are increasingly sort of factoring ownership into their procurement decisions. And if a mineral is processed or owned by a Chinese entity, and it’s going to be excluded under, let’s say the IRA, then this creates a premium for that non-China supplier, but not just in price, but also in trust. So when we talk about risk premiums or regulatory scrutiny and market access, Chinese firms, and this is TLEA’s as well, we’re certainly navigating quite a different landscape than Western firms might face in China. And I think that’s determining how capital flows, how deals are being structured. And I have no doubt how the supply chains are going to be built. 

AH: So how do you build trust then with Western customers in that kind of environment? How do you get around that? 

RS: And that’s been a big focus for us, right? So our focus has been about building credibility with the products, building credibility and trust through transparency. We have audits, we open our books, and we’re not talking financial audits, this is operational audits. I talked previously around these compliance audits and our customers wanting to have the ability to trace our supply chain. So we are willing to collaborate, have rigorous compliance. We put in place full traceability and we’re certainly meeting the global ESG standards. So our customers, we hope are not just buying our lithium, they’re buying the confidence in the supply chain that we are putting forward to them. They want to know where the product comes from, how it’s processed, whether it aligns with their sustainability and ethical sourcing commitments. And we’re giving them that. We’re giving them opportunity to come and audit and see for themselves that we’ve got all of that in place. Our Kwinana refinery is not just Australian operated. It’s designed to meet the standards of environmental performance and workplace safety. So I guess that’s sort of the things that we can do to try and build that trust and credibility with our customers. 

AH: Yeah, I’m glad you mentioned Kwinana and your operation. I guess whilst I’ve got you here, it’d be really just good to get a quick update before we kind of close out on the some final thoughts. Any updates from you on TLEA and your activities at the moment? 

RS: Look, TLEA or TLK, you know, the the kunana plant, I think it’s, it’s well known that, you know, that plant has struggled to sort of get to where it was, you know, designed to be at. But what I can tell you is that running a lithium plant is, as I’ve described before, it’s like running a big chemistry set, right. There are so many things that can go wrong. It is an intense process. It’s a 24-hour, 7 day a week. What I can tell you is that we are slowly but surely getting on top of all of the issues, the chemistry side of issues with the plant. You know, we’ve got a really good handle of, we are very consistently producing better grade product and I’m talking sort of 99% on a very consistent basis. We are slowly debottlenecking and mediating the plants with sort of a very considered projects or capital projects. And whilst we’re not quite there yet, I think you know we’ve demonstrated to our shareholders. 

So we’ve got a pathway of getting ourselves to that name plate, but it takes time, it’s challenging because we’re looking for expertise to help us that doesn’t necessarily exist in WA, certainly not in WA, maybe not even in Australia. So it’s at the same time we’re trying to train and retain some very good operators. And you know, and we’ve built a really good core of employees there who’ve now got 5,6,7 years’ worth of experience. We’ve got amazing support from our shareholders on the technical front, certainly from Kenji, who are so generous in the help and advice and the support. And we’ve certainly got their patience as well. So I have great hope for the plant. I know it’s taking longer than what it should or was designed to, but there are a lot of mitigating factors that have sort of come together to have impacted the performance of the plan. And, and you know, but I think we are, we’re definitely overcoming them one at a time and and we will get there. 

AH: Yeah, just another good example then really of how it creating these supply chains just not easy at all, no matter where the material is coming from. Yeah, exactly. Thanks for that. Let’s just wrap up here and think a little bit about the future. 

RS: Sure. 

AH: If all of these political tensions eased tomorrow, do you think that the market would naturally rebalance supply chains? Or do you think we’ve entered this new era of permanent decoupling, diversification, whatever we decide to call it? 

RS: I think if those tensions ease, there’ll be a more pragmatic balance. That’s less politics and more about the performance, more about cost, the sort of things that we talked about that will drive that end consumer decision. Right? So like you said, I think what we’re seeing globally is a recalibration of priorities. Those geopolitical tensions are very real. They’ve definitely accelerated the conversation around supply chain sovereignty, which I think is what every country is now trying to strive for. But what I believe really drives that long-term market change is that pragmatism that I talked about, the market pragmatism. So no matter where you sit on the geopolitical spectrum, the concentration in the case of refined critical minerals in one country is always going to be a structural risk. I accept that and I think everyone knows that. And we know that markets don’t like risk. We also know that how markets like to mitigate that risk is by seeking diversification, transparency and reliability. Commercial one O 1. And I think we’re already starting to see that play out. 

AH: Yeah. And assuming that rhetoric does not change, do you see a risk of a two-tier mineral world, one where Chinese-backed firms operate in one system and Western firms operate in another? 

RS: Oh I think that’s definitely a risk, right? I think if we’re not careful, we’ll end up with some quite fragmented ecosystems that are less efficient and more expensive because we’re just replicating them for the sake of creating our own sovereign supply chains. And we’re starting to see, I think, early signs of a bifurcated system, you now, one ecosystem that’s dominated by these Chinese-backed firms with integrated supply chains and scale. And another one where the Western firms are trying to build parallel capacity, often at a higher cost and a much slower pace. 

So it’s not just about trade flows. It’s also about the standards, the financing and even the pricing. And so we run the risk that we end up with duplication, inefficiency and very limited collaboration at a time when demand is growing. Customers are very cost-conscious. You know, policymakers probably see the two-tier system as being strategic hedging, I guess, but it is likely to slow that transition down if they’re not careful. 

AH: Yeah. A bifurcated world, but without those premiums, at least in lithium, it’s kind of contrary to what everyone’s hoping. Yeah. So if you could talk to, yeah, sorry, Cameron. 

RS: Yeah. I think what we should be advocating is collaboration, not exclusion. Surely we could do that. 

AH: Yeah. So if you could sit down with Western policymakers to help them better understand China’s role in critical minerals, is that what you would like to tell them? Or what would your message to them be if you have that meeting today? 

RS: Oh, look, I think I do, where I can, very gently provide this view to policymakers here in Australia, when I get the chance. I think what Western policymakers or policymakers in general need to understand is that China’s role in the critical minerals processing is very foundational. They’ve built, as I mentioned before, this vertically integrated mineral ecosystem that spans mining, refining, manufacturing, right down to the EV vehicles that these critical minerals are going into. And these governments need to understand and appreciate that it’s going to be very hard to decouple China from this. So rather than trying to build inefficient supply chains that are going to take a long time to happen, or if they do happen very quickly, it’s going to come at a cost. Why not sit down and work through solutions, collaborative solutions that involve Chinese firms that don’t exclude them? You find ways of legislating Chinese involvement or investment in critical minerals, regardless of the jurisdiction, right? You can, you know, the West Australian government has done that with the TLEA investments. That can be replicated elsewhere. That I think is a more efficient use of time, more efficient use of capital, more efficient use of resources. 

AH: I’m going to ask you to get your crystal ball out now, Raj, and let us know where you think we’re going to be in a decade. Do you still think there’s room for that collaboration you just talked about, that China-West collaboration, or do you think that the sector is already fragmenting too much into separate ecosystems? 

RS: I think in a decade, we will see a more balanced global supply chain. I’ve got to hope for that. I’ve got to hope that common sense eventually does prevail. The realities of running two supply chains, one that’s less efficient than the other, which ends up in higher costs for the end user will naturally then gravitate towards what is the more efficient solution. So I do think that we’ll see a more balanced global supply chain and China, I think, will still be a major player. Might not be as dominant, which is not a bad thing. And its dominance will be tempered by the current investment that we see in Western investment in trying to develop that critical mineral independence. We’re also going to see a lot more, I think, Africa and Latin America, Southeast Asia, they’ll all play bigger roles and that’s already happening. And the companies that thrive will be those that can navigate both of those ecosystems where you’re meeting Western standards while leveraging those global efficiencies. And once again, at TLEA, we’re trying to position ourselves right at that intersection because we are firm believers that collaboration is possible when it’s built on transparency, common behaviors, and perhaps shared values as well. 

AH: Raj, this has been so great. Thank you so much for joining us and giving us a front-row view of what’s really happening in critical minerals and the China-West dynamic. I know this is a sensitive discussion and I have really enjoyed the perspective that you have brought to it. 

RS: Andrea, thank you very much for the opportunity. And yes, your questions were difficult, but I think they were fair questions and I certainly hope I haven’t said anything that upsets anyone, but I think it’s an observation of facts and it’s observation of what is, I believe, really happening at the moment. So thank you once again for the opportunity. 

AH: Our pleasure. It’s been a fascinating look behind the headlines and a reminder that behind every, I think, geopolitical policy debate are real supply chains, real companies and real challenges as well at the end of the day. So thank you. 

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So Will, that was a really interesting conversation. I thought that Raj was really open and very direct about his views, which I really appreciated. What was your takeaway from everything? 

WA: Yeah, I mean, I think he covered so much ground, so much interesting ground, and it’s a really complicated situation, isn’t it? I think China has this massive lead in the whole of the electrification, in the whole of the lithium-ion battery supply chain, in the EV supply chain. And I think, as he said, there’s this misconception that they’re almost doing that as a weapon against the West. But I think what he brought it out really clearly is that they’ve been doing this for 15 years or so. They spotted an opportunity. They needed to go down this electrification route because they needed to sort of move away from fossil fuels. Because you remember when you travel to China before, often there’d be a lot of pollution and things like that. So there’s a real need to go down this electrification route and they’ve done it really well. 

Now with the West catching up and realizing that it also needs to move into that space with climate change and everything else. But they’re trying to do it in double quick time and you can’t do these things in double quick time. It takes a very long time to build up these ecosystems and to get the know-how and the West is just trying to catch up all the time. So there’s talk of this de-risking, decoupling. Yes, you can understand why Western companies, Western governments want to do that because of the security angle of it, but it’s really hard to do it. And I don’t think the West is ready to do it. I don’t think it is a black and white situation. I don’t think you want to have that diversification or that split between Western supply chains and China. 

AH: Yeah. I thought it was interesting that Raj framed this as a diversification rather than a decoupling, as you just said, because the decoupling sounds really dramatic, but it’s basically impossible in the short term, as you just noted. China is just too embedded in every stage of the critical minerals chain. And what’s actually happening therefore is diversification where you’re spreading your supply sources. You’re building these parallel processing hubs or trying to, and trying to create enough redundancy so that no one country holds all the cards. And it’s less of a clean break and more of a kind of a rewiring of a very complex web and that’s a lot slower and more expensive and more politically complicated than the headlines make it sound too. 

WA: Yeah. And I think although we think that China controls it all, it controls the processing side, but it’s still very reliant on getting the raw materials and that is much more diversified and it’s becoming more geographically spread around as well. So that’s good. And I think what we do need to do is to have more diversification in the processing side. But I think we can’t do it on our own. When we’ve tried to do it on our own, it’s hit hurdles. And I think it does come back to all the experience that China has and the expertise. And at the end of the day, they can do it because of all their experience. They can do it very competitively. And I think other countries are struggling and will continue to struggle with that thing. So I think it’s coming back again to we can’t decouple. I think it’s a bigger picture here that’s over the last 30 years or so we’ve gone down that globalization route. That’s now sort of almost de-globalization going on. But I think we’ve got to find a way that we’d need to have those partnerships. We’ve got to build up that trust again, that we can collaborate. I think that’s the real key thing. 

AH: Yeah, definitely. I think Raj seemed optimistic that collaboration would be something that would become inevitable, hopefully down the line, because on a practical basis, even if the mining shifts elsewhere, China’s dominance in refining and component manufacturing creates this invisible dependency, almost like a hidden reliance. I think Western governments often underestimate these midstream choke points or how easy it will be to replicate them. And then as you also just noted, Chinese companies’ economies of scale make them structurally just cheaper. And breaking away from that means accepting higher costs and potential inflation for EVs and electronics and clean energy tech. And I think that’s not always the easiest thing for people to do. 

WA: I think the West has tried to do it in a sort of a piecemeal approach. Each company has been looking at their own, what they want to be, what part of the supply chain they want to be. And I think, as was mentioned, you need to build a whole ecosystem and that needs to be more planned and more coordinated. And that’s where the West I think is really struggling to do that. And it’s really interesting. I thought what he said about how Indonesia is following the Chinese roadmap. And it is doing that on a much more comprehensive thought, building up that ecosystem, building up those big industrial plants and things like that. So yeah, I think maybe in the West there’s also a danger that whereas we’re always trying to catch up with China, we might even be overtaken by some other countries as well. He mentioned Indonesia and India as well. And I know while he said it’s a matter of time and cost, but you know, it’s definitely there and look what’s happened in nickel just in the space of a couple of years. So. 

AH: Yeah, I think the world definitely needs a little bit more collaboration, perhaps, and a little less butting of heads in order to create these supply chains. So those decoupled supply chains or de-risked diversified supply chains are going to cost more. We know that Western customers aren’t necessarily paying extra for these secure minerals and that the foreign entity of concern rules are also a kind of a spanner in the works that are creating more of a bifurcated market. What do you think that cost is going to do to the sector and plans to create these ecosystems? 

WA: We know that again, it comes down to China having the economies of scale and all the know-how and everything else. So trying to set that up in the Western country and using Western energy costs and Western labor costs and things like that, much more expensive. The way to try and reduce those costs, to try and make it more competitive is I think we have to partner with China. They’ve got the latest technology and they know how to bring it into production. And all those things, if you don’t know how to do it because you don’t have the know-how, it just takes a lot longer, it’s a lot more costly and it’s more likely not to succeed. So I think again, it makes sense if we do it in a collaborative way. 

AH: Definitely. Well, as ever great talking to you. I thought that was a really interesting podcast, but also as ever fantastic discussion with you about a really interesting topic. We’ve got LME week coming up soon. 

WA: Yeah, it’s going to be a busy time as well. Lots of things happening in the base metals and actually in the sort of battery raw material world, it’s not as gloomy as it was say six months ago. So we’ve seen some upturns in lithium and cobalt prices. So I think, well, yeah, there’ll be a lot of things to talk about and catch up on. 

AH: I’m really looking forward to coming back to my hometown of London. So I will look forward to seeing you in October in person as well. 

WA: Sounds good. 

AH: Great, well that’s it for this episode of Fast Forward. If you found it useful, share it with a colleague or friend, follow the show on your favourite podcast app or find it under the insights section of the Fastmarkets website. Thank you for listening and see you next time.