Chinese firms eagerly await Taliban approval to tap into Afghanistan’s vast lithium reserves

Many Chinese firms are keen to cash in on Afghanistan’s vast wealth of lithium, but they have to wait until the Taliban allow lithium mining to resume.

Afghanistan, dubbed “the Saudi Arabia of lithium”, is sitting on one of the world’s largest lithium reserves, which, among other minerals, could be worth a $1 trillion, a catalyst to lift up the country’s fragile economy.

Since retaking power in Afghanistan in August 2021, the Taliban has banned the extraction and sale of lithium. During this time, according to the Washington Post, lithium prices skyrocketed eightfold from 2021 to 2022, attracting hundreds of Chinese mining entrepreneurs to Afghanistan.

Taliban has thus seen potential from Chinese companies to invest in lithium deposits as the country’s economy remains hindered by unilateral sanctions, including $9 billion in frozen assets, and a lack of funding shortfall, prompted by human rights concerns, particularly the rights of women and girls.

In April, the Chinese company Gochin expressed willingness to invest $10 billion in Afghanistan’s lithium deposits which could create 120,000 direct and a million indirect jobs in the country amid a surge in the unemployment rate and widespread poverty.

China’s interest in Afghanistan’s lithium reserves could be well explained by the soaring global popularity of electric vehicles (EV) and electric devices, where the mineral plays a key component in rechargeable batteries and in clean technologies to tackle climate change amid growing prices in the global market.

According to the International Energy Agency, the demand for lithium in 2040, could rise 40-fold from the 2020 levels.

Moreover, while the US remains absent from Afghanistan resulting from the sanctions on the Taliban, it is Chinese companies that are now peacocking themselves to gain use of lithium in a bid to tighten China’s grasp on much of the global supply chain for EV minerals.

Nevertheless, mining and extraction of lithium could take years to resume because of the challenge of bringing lithium to market as well as poor road conditions and lack of infrastructure in the mineral-rich mountains of northeast Afghanistan’s Kunar and Nurestan provinces, where lithium reserves are most found.

Therefore, lithium could only be cost-efficient when new roads, railways, ore-processing plants, and power plants are built in and around these regions. And until then, Chinese companies have to wait.

Despite the challenges, the Chinese company Gochin has expressed the readiness to compete for mineral resources by building infrastructure, a lithium ore processing plant, and battery factories in Afghanistan.

Henry Sanderson, the executive editor of Benchmark Mineral Intelligence, told the Washington Post that by 2030, when about 60% of all cars in China, Europe, and the US will be electric, the world is expected to face a lithium shortfall.

“China’s lithium sector is in a really enviable position: They dominate the processing, they’ve got the battery materials and factories, but that whole supply chain goes defunct if you don’t have the raw material to feed the industrial machine,” Sanderson added. “That’s why they’re going to Afghanistan. They need to secure as much as they can.”