Several European lithium mining and refining projects are poised to launch commercial operations next year, supported by a push among original equipment manufacturers, or OEMs, to regionalize their battery supply chains and reduce dependence on imported material.
Based on existing plans, Europe’s annual lithium processing capacity is set to reach approximately 650,000 mt/year by 2028, with more than 20 projects currently advancing their mining and refining operations toward full-scale commercial production.
The growth of Europe’s domestic lithium industry comes amid growing concern about an impending global shortfall in the supply of materials essential to lithium-ion battery production including lithium, graphite, copper, cobalt and nickel.
By 2027, S&P Global Market Intelligence anticipates a global lithium deficit of approximately 4,000 mt of lithium carbonate equivalent, with annual global demand forecast at 1.87 million mt, up from 884,000 mt in 2023.
In Europe, the threat of supply deficits is being compounded by a surging market for battery electric vehicles which is forecast to grow at a compound annual growth rate (CAGR) of 27% between 2023 and 2027, according to the latest forecasts from S&P Global Mobility.
OEMs pursue local-for-local approach
In order to reduce the potential for supply shortfalls, OEMs are diversifying their sources of battery raw materials and components across a wide variety of production and delivery locations.
Consistent with this approach, OEMs are adopting a local-for-local approach whereby production and the sourcing of components and raw materials is situated close to core markets in order to minimize lead times, lower transport costs and de-risk their supply chain.
This strategy is particularly relevant to Europe’s lithium supply with trade data from Eurostat showing that EU member states are wholly dependent on processed lithium imported from a select number of third-party countries such as Chile, the US, China and Russia.
OEMs are also seeking to improve transparency surrounding the mining and processing of the material across their supply chains with many now sourcing lithium directly from raw material producers for delivery to their battery cell suppliers.
In November 2021, Stellantis signed a five-year supply agreement for up to 99,000 mt of lithium hydroxide produced Vulcan Energy’s Zero Carbon Lithium Project in Germany’s Rhine Valley. Similarly, BMW has secured six-year, 50,000 mt offtake agreement with European Metals Wolfsberg Lithium project in Austria.
In May 2023, a spokesperson for BMW told S&P Global Commodity Insights that securing raw materials directly from producers ensures compliance with environmental standards and human rights which were an essential criterion in the company’s procurement strategy.
“In addition to predictable prices, this gives us complete transparency about the origin and mining methods of the material,” the spokesperson said.
CRMA to expedite project permitting
On Nov. 14, the European Council and the European Parliament reached a provisional agreement for the adoption of the European Critical Raw Materials Act, or CRMA.
The proposed regulation requires that EU capacities along the strategic raw material supply chain satisfy at least 10% of EU annual consumption of mined material, at least 40% consumption of processed products and at least 25% consumption of recycled material.
The regulation also requires that no more than 65% of the EU’s annual consumption of each strategic raw material at any relevant stage of processing should come from a single third country.
The regulation also seeks to increase domestic EU production of critical raw materials by identifying strategic projects that would benefit from faster permitting procedures and EU-facilitated financing.
Under the agreement between the council and the parliament, the permitting process would take a maximum of 27 months for extraction projects and 15 months for processing and recycling projects, with the timeline to include public consultation for a project’s environmental impact assessment.
European project developers have welcomed the designation of strategic projects and the accelerated permitting process afforded under the CRMA.
A spokesperson for French mineral production and processing company Imerys, which is developing two lithium mining and processing projects located in the UK and France, told S&P Global that they welcome the new permitting timeline.
“We will closely follow the implementation of this measure, to make sure it translates into a real acceleration of the selected projects,” the spokesperson said.
European lithium chemical refiner Livista Energy Europe also welcomed the new permitting schedule put forward by the EU CRMA.
“The new permitting schedule is a step in the right direction,” Livista Chairman Roland Getreide told S&P Global.
“The 12-month permitting timeline for refining projects is exactly what we had in mind,” he said, adding the new regulation provides “greater clarity” for Europe’s emerging lithium industry.
In June, Livista announced plans to construct a first lithium refinery at Emden Seaport in Lower Saxony, Germany. The refinery will initially produce 30,000 mt/year of lithium hydroxide and 10,000 mt/year of lithium carbonate with operations scheduled to begin in 2026.
While the CRMA will not directly benefit UK lithium projects, the regulation is still seen as a positive development for the country’s aspiring lithium projects.
UK-based lithium processing company Green Lithium is currently developing a 50,000 mt/year lithium refinery at PD Ports in Teesside.
The company’s founder as well as marketing and communications director, Richard Taylor, told S&P Global that Green Lithium plans to export lithium hydroxide to Europe and sees the implementation of the CRMA as a positive step for Europe’s lithium industry.
“It is good for the overall battery value chain and building confidence in Europe as a whole,” Taylor told S&P Global.
Source: S&P Global