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SMM estimates show that, as new capacity in Indonesia, India, the Middle East and other regions comes onstream in a concentrated wave in 2027, the global primary aluminum supply-demand balance will shift from the current deficit to a phase of temporary oversupply. 2027 may well mark the key inflection point of this capacity expansion cycle.

Chinese companies have announced US$6 billion of investment in battery and EV component plants in Morocco, where locally built cars are not exposed to the EU's additional duties on China made EVs. At the same time, lithium carbonate futures fell to their lowest level since December 2025 on concerns over the demand outlook, raising the question of where future battery-grade lithium demand will be located and how fast it will grow. EU duties target China-built EVs, while Moroccan production avoids them China now makes more than seven in ten of the world's electric cars. In 2024 it produced over 12 million EVs, of which 1.25 million were exported, mainly to Europe. In the same year, the EU imposed extra duties of up to 35% on Chinese EVs, on top of an existing 10% import tariff, as part of a system of tariffs and rules meant to protect an auto industry on which 13 million jobs depend. The measures have so far produced limited results, as Chinese vehicle sales in Europe nearly doubled between 2024 and 2025. Much of that volume is being driven by production in Morocco, where Chinese firms producing cars avoid exposure to the EU tariffs. Morocco produced 560,000 vehicles in 2024, but only around 50,000 were electric Morocco was already a significant automotive base. Cars are its biggest export, and Renault and Stellantis together form a manufacturing base that exported US$17 billion in cars and parts in 2024, making Morocco one of the EU's largest automotive trading partners, ahead of China. Of the 560,000 vehicles produced in 2024, the vast majority were petrol and diesel models, and only around 50,000, or about 9%, were electric. Stellantis and Renault have made multi-billion-euro commitments to expand EV and hybrid capacity, while Chinese investment is filling gaps in cathode and battery cell production. Free zones, ports and trade agreements underpin investment; supply of battery minerals is partial The government has spent two decades building free zones, areas where businesses can import, manufacture, process and re-export goods without paying normal taxes or customs duties, including automotive clusters such as the Tanger automotive city. The deep-water port in Tangier is the largest in Africa and the Mediterranean. Morocco has a free trade agreement with the EU and is the only North African country with one with the US. This year it introduced a carbon tax to keep its exports compliant with EU rules. On raw materials, Morocco holds around 70% of the world's phosphate reserves and a supply of cobalt, both relevant to battery production. Lithium reserves are not mentioned in the source material, and no source of lithium supply for the planned plants has been disclosed. Transit hub or full industrialisation: policy and technology uncertainties remain Whether Morocco benefits from the investment depends on what kind of production Chinese firms undertake. They could use Morocco as a transit hub with minimal processing, and the EU ruled in 2025 that aluminium wheels shipped from Morocco were being unfairly subsidised by Beijing. Alternatively, they could build full factories, share technology, train local engineers and buy from local suppliers, which is the type of industrialisation the African Union wants to encourage. Three uncertainties stand in the way: the EU's tariffs on Chinese electric cars are set for only five years and already face legal challenges, the technology may remain in Chinese hands, and the geopolitical and climate context is volatile enough that business plans could change quickly. Lithium carbonate futures fall to a nearly 10-month low on the China-EU hybrid car deal On October 12, the most active lithium carbonate contract on the Guangzhou Futures Exchange touched 104,680 yuan/mt, its lowest since December 17, 2025, and ended daytime trade at 104,740 yuan/mt, down 11.8%, the steepest daily fall since March. The fall followed a deal between China and the EU that could cut Chinese hybrid car exports to the bloc by more than half, according to European Trade Commissioner Maroš Šefčovič. Orient Securities analysts said the deal was better than earlier expectations of EU tariff hikes, but that China's export growth to the EU will slow afterwards. Prices are down by half from the 33-month high of 209,880 yuan/mt reached on May 13, amid concerns over the 2027 demand outlook. On the supply side, CATL's Jianxiawo mine has not yet restarted, and intermittent speculation about a restart has affected sentiment. Shares of Tianqi Lithium and Ganfeng Lithium fell 5.1% and 3.9% respectively. Overseas battery capacity could add a new lithium demand node, but volumes are undisclosed Chinese-backed cathode and cell plants are being built in Morocco, and Morocco's EV output is currently a small share of its vehicle production. Once operating, such plants would consume lithium chemicals, but no capacity or start dates have been disclosed, so the volume cannot be sized. Morocco could become an additional destination for battery-grade lithium outside China, partly offsetting the loss of direct vehicle export volume to the EU, though its effect on lithium prices cannot be quantified. The October 12 price move was driven by the China-EU hybrid deal, not by Morocco. Overall, the Moroccan build-out sits between trade policy that limits China's vehicle exports and a lithium market weighed down by 2027 demand concerns. Over the coming months, the capacity and timing of the Moroccan cathode and cell plants, the outcome of the legal challenges to the EU tariffs, and the 2027 demand outlook will be key indicators for assessing lithium demand and prices.

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