November 03, 2022
Lithium is in high demand, and automakers are struggling to secure supplies in line with their ambitious electrification goals. A key component in electric vehicle (EV) battery packs, the light metal is often referred to as “white gold,” with lithium prices soaring this year.
In May, prices were seven times higher than at the start of 2021. Then, in mid-October, industry watchers noted that the cost of lithium in China hit an all-time high. The country is a dominant force in the expanding EV battery market, producing three quarters of all lithium-ion batteries – something Europe is hoping to change as it shifts its focus to electric mobility.
More important than fossil fuels
European Commission President Ursula von der Leyen recently pointed out that lithium and rare earth elements (REEs) will soon become more important than oil and gas. More than a hundred industrial battery projects are currently being developed across the EU, including gigafactories for the production of battery cells.
While plans exist to source more lithium in Europe to support these projects, supplies of the metal are expected to remain tight. This is mainly due to the rapid increase in electric vehicle sales in key markets, which is straining battery supply chains.
The International Energy Agency reported that global sales of electric vehicles in 2021 doubled from the previous year, reaching a record 6.6 million. The organization forecasts continued growth in 2022, meaning automakers and battery suppliers will be under pressure to source enough battery materials.
The automotive industry is preparing for a shortage of lithium. A recent report by Benchmark Mineral Intelligence highlighted that the world would need more than twenty times the amount mined last year to meet demand through mid-century. Although automakers aim to reduce the amount of REEs in electric vehicles, this transition will not happen overnight.
“Lithium’s long-term path is set, but the challenge of scaling the supply chain has only just begun. We are just at the beginning of a generational challenge that will not be resolved in the 2020s,” said Simon Moores, CEO of Benchmark.
Localization of the lithium supply
Leading European automakers, from Volkswagen to Stellantis, are rushing to secure a supply of lithium. With the aim of being fully electric by 2030, provided market conditions permit, Mercedes-Benz is also establishing new raw material partnerships.
The German luxury brand recently signed an agreement with startup Rock Tech Lithium to receive 10,000 tons of battery-grade lithium hydroxide annually, enough to build 150,000 electric vehicles.
“This significant amount of lithium, sourced directly from Rock Tech, will help Mercedes-Benz advance the localization of European production of state-of-the-art battery cells,” said Markus Schäfer, Member of the Board of Management of the Mercedes-Benz Group.
New partner Rock Tech made headlines last year when it announced plans to build Europe’s first lithium converter factory in Germany near Tesla’s Gigfactory. As part of the agreement, Rock Tech will supply battery-grade lithium hydroxide from its plant in Brandenburg to Mercedes-Benz battery partners starting in 2026. Mercedes-Benz said the move would help it localize sourcing.
Both companies want to turn the production of lithium hydroxide into CO2 neutral by the end of 2030. That means the metal is only sourced from mines audited by the Initiative for Responsible Mining Assurances – an organization that other automakers like BMW, Ford, Tesla and Volkswagen have also joined.
Another project led by French minerals giant Imerys is dedicated to developing a lithium extraction project that could help secure supplies to Europe’s growing electric vehicle market. The company aims to produce 34,000 tons of lithium hydroxide annually from 2028, which could be used to equip 700,000 electric vehicles per year.
Described as groundbreaking, the project will be located in the heart of France and could become one of the largest lithium mining projects in Europe. Imerys anticipates at least 25 years of mining, ‘with strong potential for expansion’.
The project would increase European self-sufficiency at a time when vehicle and battery manufacturers are heavily dependent on imported lithium. Imerys added that the construction investments of the project will be around 1 billion euros.
“The project would provide French and European automakers with a competitive domestic lithium supply source and make a significant contribution to addressing the challenges of the energy transition,” said Alessandro Dazza, CEO of Imerys. At the request of Autovista24 the company declined to comment on whether it intends to develop relationships with car manufacturers outside of France.
The plans are ambitious as the company needs to ensure its proposed project is not as polluting as traditional mining methods. Imerys promised it would aim for lower carbon emissions2 emissions from its operations and is targeting less than half the carbon emissions typically associated with hard rock lithium projects.
This is important as lithium mining continues to draw environmental criticism. Earlier this year, after weeks of protests, Serbia ended Rio Tinto’s multi-billion lithium project in the country. The deal could have been one of the largest of its kind in Europe and Imerys could now take that spot.
With commodity prices volatile over the past year, Europe will need to ramp up lithium mining and refining. Automakers, meanwhile, need to continue partnering with mining companies to stabilize supply chains and produce electric vehicles.