Europe to ramp up lithium mining to cut China’s market grip
Summary
- A fleet of new lithium mines are set to open across Europe in the next few years as the European Union pushes to increase supply of the metal deemed vital for the energy transition in a bid to combat China’s grip on the market.
A fleet of new lithium mines are set to open across Europe in the next few years as the European Union pushes to increase supply of the metal deemed vital for the energy transition in a bid to combat China’s grip on the market.
Lithium is crucial to limiting carbon-emissions due to its use in electric vehicle batteries. Demand from BEVs is set to triple in Europe in the next ten years, according to commodity-research firm Fastmarkets.
This poses a problem for the EU as 97% of lithium used in the bloc comes from a single source: China.
“We are totally dependent on China," President of the European Commission Ursula von der Leyen said at a clean-tech conference earlier this year.
Russia’s invasion of Ukraine and the resulting energy crisis laid bare Europe’s reliance on a single source for gas. The EU wants to avoid that predicament with lithium.
To cut over-reliance on Chinese lithium, the EU has set a target to produce at least 10% of its annual consumption by 2030, according to the Critical Raw Materials Act which came into force in May.
While slumping lithium prices are stifling investment into new mines in Europe, China is able to produce the so-called white gold at much lower costs due to cheaper labor and energy, and easier financing from state-controlled banks, according to William Adams, base-metals analyst at Fastmarkets. This crowds competition and floods the market with oversupply, reducing prices.
“[Europe] is in a difficult place to be able to catch up. To get the know-how and to be able to do it at a similar price is a big ask. If you look at things like capex, labor and energy, it’s a big hurdle," Adams said.
Two years ago, lithium prices were around $84,000 a metric ton as the metal was running hot on electric-vehicle demand. Now, due to slower-than-expected EV sales and Chinese lithium supply flooding global markets, prices sit 88% lower at around $10,300 a ton. And it might not be until toward the end of this decade before prices start to tick upward, when the market goes into a deficit, according to metals-investment manager Sprott.
“Low prices allow China to keep that leadership position in the market and maintain some price control over, not only lithium, but across the board with nickel and other metals," said Steve Schoffstall, director at Sprott.
London-listed Savannah Resources—which operates one of Europe’s largest lithium deposits—is set to start producing toward the end of 2026. The miner plans to dig up enough lithium to equip at least half a million electric vehicles in Europe a year with lithium-ion batteries. This can potentially increase to nearly a million a year depending on how well Savannah can optimize processing, its Chief Executive Emanuel Proenca said.
A host of other miners across Europe are set to join Savannah in the next few years, similarly hoping to meet demand.
In its forecasts, Fastmarkets has eight mines that it views likely to start producing throughout this decade. These will take European mine supply from virtually zero to 58,000 tons of lithium-carbonate equivalent a year by 2034.
“These are very large mines that are looking to come online," Schoffstall said. Securing that supply domestically should help regain some pricing control from China and allow Europe to build out a supply chain, he added.
“It gets you out of the situation like Europe has with Russia and natural gas where they’re really reliant on one specific partner," Schoffstall said.
Write to Christian Moess Laursen at christian.moess@wsj.com
