The joint venture agreement between China Minmetals Corp and Qinghai province to tap major salt lake resources marks a critical step in advancing China's lithium resource development, particularly in response to global battery industry demand, said industry experts.

The establishment of a major salt lake group in Qinghai reflects China's efforts to reduce dependence on foreign lithium supplies, especially in the face of growing global demand for lithium driven by the expanding electric vehicle and battery sectors, they said.

The agreement signals a significant boost in technological and financial capabilities for developing China's abundant salt lake resources, which also aligns with the government's strategic priority of enhancing domestic resource security, said Ma Yinqiong, a senior analyst covering metals and supply chain materials at Rystad Energy, a market observer.

"China's salt lake enterprises have been committed to the development of salt lake brine resources in recent years, as the content of lithium element is rich in China's salt lake resources."

Lithium is a key metal used in battery production for the EV industry, as well as power storage facilities used in the wind and solar power sectors. Much of China's lithium resources are sourced from salt lakes in Qinghai and the Xizang autonomous region.

The commercialization of lithium extraction from salt lakes, however, has been slow, in view of the geographic and environmental restrictions and technical barriers. Ma said he believes CMC, which is a leading mineral development enterprise with rich technical experience and financial strength, can promote the development process of lithium extraction from salt lakes.

CMC said that with Qinghai's advantages in salt lake resources, the company will fully exploit its strengths while sharpening its edge in resource development and utilization.

According to Rystad Energy, there are two main forms of lithium resources in the world — the ore resources such as spodumene and lepidolite and brine resources in salt lakes. In the past few years, the development of lithium resources in countries around the world has been very mature.

Establishment of the JV comes as global competition for lithium intensifies. While Australia, Argentina and Chile have long been dominant in lithium production, China's focus on its domestic salt lakes represents a strategic shift to secure lithium supplies within its borders, Ma said.

Some ore mines in Australia, for example, see their resource reserves, annual production capacity and long-term supply agreements as being very transparent, with limited development potential. Argentina and Chile have also established processes for mature commercial development of lithium salt lake resources, she said.

The China Nonferrous Metals Industry Association's lithium industry branch said that last year China imported around 4 million metric tons of lithium concentrates, up 41 percent year-on-year, mainly from countries such as Australia and Brazil.

Though China ranks among the top 10 in terms of lithium ore reserves, its existing resources cannot meet the demand for lithium batteries, leading to partial reliance on imports, said Charlie Zheng, chief economist at Samoyed Cloud Technology Group.

Chinese enterprises such as Ganfeng Lithium, Tianqi Lithium and Sinomine Resource Group have long recognized the importance of mastering resources, and have been investing directly in Australia, Argentina, Chile and Zimbabwe lithium resources. They have also signed long-term supply agreements with local mining enterprises to ensure stability in supplies.

This move could also reduce the risks associated with relying on foreign lithium producers, many of which are now subject to protectionist policies and geopolitical challenges, said Ma.

"By combining Qinghai's vast lithium reserves with CMC's resources, expertise and international experience, the new entity will help elevate China's position in the global lithium supply chain," she added.