The European Union’s new Critical Raw Materials Act is a bold step forward in securing the region’s clean energy supply chains. Here, Benchmark Mineral Intelligence looks at how the Act’s domestic production targets stack up in the lithium sector.
European demand for lithium in battery applications is forecast to increase by over 300% between 2023 to 2030. This meteoric rise is primarily driven by the demand for lithium-ion batteries in electric vehicles (EVs), and results in the region having the second-largest share of global lithium demand for the foreseeable future.
In 2030, Benchmark expects Europe to account for more than 25% of battery-grade lithium demand, behind China’s 40%. Despite this, Europe currently only accounts for under 1% of the global lithium supply, making the region highly dependent on imports for its lithium requirements.
The critical need for the European Union (EU) to secure stable supplies of lithium, in order to achieve its planned twin transition to a green and digital future, has been reflected in the recent announcement of the Critical Raw Materials Act (CRMA) in March 2023. The CRMA aims to provide a framework for the EU to strengthen its domestic position in critical mineral supply chains. It is an ambitious proposal that includes targets for the EU to meet 10% of its mined demand for critical minerals, which includes lithium, from EU operations and 40% from domestic processing plants.
Benchmark forecasts that by 2030, EU member states will be producing a little over 50kt LCE of mined supply, and more than 70kt LCE of chemical supply. These volumes equate to 8%-12% of projected EU demand, respectively. This is compounded by the fact that today there is only one operating lithium mine, and no processing plants in operation.
There is therefore a large gap between the EU’s ambitions and its projected supply pipeline.
Mine permitting to be streamlined
Europe currently has 28 lithium mine projects under development, with 19 of these in EU member states, and 4 in the UK. The majority of these EU and UK projects are forecast to be operating by the late 2020s and are set to be producing nearly 70kt LCE by 2030.
Most of these mines will be based on hard rock deposits, though 5 are expected to use Direct Lithium Extraction (DLE), which could make up around 15% of the supply.
A key aspect of the CRMA is the streamlining of the permitting process which aims to provide permits to ‘strategic’ mines, within 24 months. This aims to ensure that these pipeline projects and any future proposed projects are operational within a timeline that will help to meet climate goals. On average, it takes around 10-15 years to bring a new mine into production at present, particularly in geographies such as Europe and North America.
The inclusion of mining targets within the CRMA has made clear the broad support for increasing extraction within the region, at the EU and indeed European national level. However, at the local level, in the areas of the proposed mines, some projects have seen opposition from local communities and governments.
Opposition to mining projects has typically focused on perceived environmental and social risks, such as biodiversity loss, pollution, water security, as well as loss of the current way of life. Whilst in the USA, waste from extraction has also been a cause of opposition, this issue has featured less in the EU context.
One such project to face local pushback is Rio Tinto’s Jadar lithium project in Serbia, which in 2022 had its licenses revoked by the Serbian government following widespread protests in the country. Rio Tinto believes Jadar could be a world-class asset and the company has stated it remains focused on consultation with all stakeholders to explore all options related to the project’s future.
Elsewhere in Europe, Infinity Lithium acquired a permit from the local government earlier this year for its San Jose integrated hard rock deposit in Spain, which allows for extraction and processing activity in certain areas. San Jose was initially proposed to be an open-pit mine, but has since been moved underground following local opposition, a move likely to extend development timelines, operating and capital costs.
Refining capacity set to fall short
Within Europe, there are currently 29 lithium processing plants in the pipeline, 15 of these are in the EU, and 8 in the UK. The EU is currently forecast to fall short of its CRMA target to meet 40% of its demand via domestic chemical supply, achieving only around 12%. Facility capacity varies by project but assuming an average capacity of 20ktpa, nearly 9 additional new refineries would need to be added to the pipeline to be on track to meet the CRMA domestic refining target.
The CRMA aims to address this by streamlining the permitting process, to ensure that it takes a maximum of one year for processing plants to be awarded a permit. Public opposition to processing plants within the EU is lower than for mine project development.
However, there are still environmental concerns, primarily with the disposal of waste.
Rock Tech’s Guben pilot plant, has sought to address this issue by developing ‘zero waste’ production of lithium hydroxide. The company’s plan is to put in place purchase agreements for by-products of its processes, which could be used by other sectors such as the cement industry. However, the market demand for these by-products is unclear, especially at the levels that will be produced within the EU if CRMA targets are to be met.
Rock Tech plans to source the majority of its feedstock from its Canadian deposits, but will still need to source feedstock supplies from other sources. This mismatch of proposed chemical supply and secured feedstock is echoed across EU plans and to an even greater extent given that many processing plants do not have integrated mines. It is of note that to comply with the rules of origin, raw material can be sourced from outside the EU, as long as it is then processed within its borders.
As recognised by the CRMA, if EU demand cannot be met with its own domestic supply, efforts to secure feedstock outside of the region are imperative. South America and Africa are forecast to produce more than 40% of the global mined lithium supply by 2030 and are likely to be high on the list of prospective partners.
While steps have been made to create key partnerships most notably with the EU-Chile Advanced Framework Agreement, a similar deal is yet to be made with Australia, and China has already established its place within the African lithium landscape, with around 90% of the 2030 supply from the continent having some Chinese involvement.
The inclusion of Chile in incentives within the US Inflation Reduction Act (IRA) may also pose a barrier to the EU securing its own supply of feedstock.
Further evidence of the EU’s recognition of the need to cooperate with like-minded nations can be seen from its involvement in the Minerals Security Partnership (MSP), which includes the US, Chile, and Australia, and aims to “bolster critical mineral supply chains”.
Feedstock-producing nations are increasingly looking to keep hold of the economic benefits of their lithium resources. Zimbabwe placed a ban on the export of raw (direct shipping ore) lithium in Q4 2022, and there are a growing number of brine extraction projects planned in Argentina and Chile.
Whilst sourcing processed lithium abroad does increase the supply risks that have been illustrated by COVID-19 and the Ukraine crisis, it does provide more efficiency and prevent the need for shipping large quantities of raw materials, and the subsequent disposal of the waste.
However, outsourcing supply presents other sustainability challenges. And while trade agreements are increasingly including environmental and social chapters, the EU has not presented any policy or major financial incentives to best ensure that the high environmental and social standards targeted by the Paris Agreement, are achieved.
Recycling growing in importance
Recycling will play an important role, especially in ensuring that waste is designed out of the supply chain. However, in the short and medium term, it will not be able to provide much of a dent in meeting EU demand, because the region’s production of battery scrap is still low. It will be a challenge to meet the CRMA’s target of 15% of demand being met from secondary sources. Though legislation such as the EU Battery Regulation has already laid the groundwork and signalled the need for industry to increase its secondary lithium recoveries to meet 50% of demand by 2027 and 80% by 2031.
Overall, the CRMA is a major step forward in the EU’s domestic battery supply chain strategy. Challenges remain though in meeting domestic targets around extraction, refining and recycling, not least around the varying levels of national or local support for such projects. Whilst policies and decisions often fall under EU jurisdiction, the gap between local and EU aims may result in lengthy timelines and unclear processes.
In order to meet its planned twin transition to a green and digital future, the EU will need to ensure that its strategy for securing lithium and other critical material supplies can be achieved while also meeting the aims of local stakeholders. There will need to be a balance of risk in diversifying supply, by strengthening ties with lithium-rich nations and deciding how far supply can and should be met domestically.
Claudia Cook, Lithium Research Analyst