EU Says “No” to Lithium, and the Underlying Causes Are Worth Attention

SHANGHAI, Jun 9 (SMM) - In recent years, as many countries have announced their efforts to promote electrification of vehicles, the market of new energy vehicles installed with power batteries has continued to boom, driving up the demand for relative raw materials. Lithium metal, as one of the raw materials for power batteries, has always been in relatively tight supply.

According to SMM Prices, since the second half of August 2021, the spot prices of lithium metal have been moving all the way up, and rose even higher entering 2022. The metal once peaked at 3.16 million yuan/mt, a new high in three years. Although the prices have been falling since late April, it still stood at a multi-year high of 2.97 million yuan/mt as of June 9.

The price trend has made it clear how much lithium resources are in demand. Therefore, lithium ore and other resources have not only triggered the competition among domestic lithium industry chain players, but overseas countries and major lithium mining enterprises have repeatedly strengthened their positioning in terms of lithium ore.

But it is against this backdrop of "universal seizure" that the news has emerged that the European Commission is evaluating a proposal by the European Chemicals Agency (EHCA) to classify lithium carbonate, lithium chloride and lithium hydroxide as materials hazardous to human health. It is reported that although the proposal does not directly ban the import of lithium, it will lead to more stringent requirements for processing, packaging and storage of lithium-related products compared to the past, increasing the costs of lithium processors if it is indeed approved into law.

The European Commission will meet on July 5-6 to discuss the proposal, with a final decision to be made by the end of 2022 or the beginning of 2023.

Albemarle has said that if the EU classifies lithium as a hazardous material, the company's Langelsheim plant in Germany would have to be closed. According to Scott Tozier, the company's CFO, if the proposal goes through, the company will no longer be able to import lithium chloride, its main raw material, putting the Langelsheim plant at risk of closure. The plant, which has annual sales of around US$500 million, would have a significant impact on Albemarle's operations if it were forced to close.

This is why the proposal is also a wake-up call to the current market. How to strengthen control in production, transport, use and recycling to minimise the impact on the environment and ecology has become an issue that many companies should consider.

But even so, in the current explosive growth of new energy vehicles, the growing shortage of lithium resources still prompt overseas countries to strengthen the control of their lithium resources. Argentina, one of the world's largest suppliers of lithium ore, recently set the export price of lithium carbonate at $53 /kg, that is, $53,000/mt, in order to prevent export offers being too low and improve the transparency.

Chile, the world's second largest supplier of lithium, has also previously drafted proposals to promote the nationalising of large copper, lithium and gold mines. Although the proposals were not adopted, the importance it attaches to resources such as lithium can still be observed. Subsequently, it is said that the Chilean government has decided to set up a state-owned lithium enterprise and tis operating model will be decided by the end of this year.

Mexico recently passed a bill proposed by Mexican President AMLO, requiring state-owned companies to take precedence over private capital in lithium mining. If the proposal is finally passed, oil and lithium will be included as Mexico's strategic minerals.

Even the European Union, which has proposed to classify lithium as a hazardous substance, has previously estimated that by 2030, Europe's demand for lithium will be 18 times higher than in 2020, and that this figure will increase to 60 times in 2050. The International Energy Agency has also reported that lithium demand in 2040 could be 13 times higher than today, and if the commercialisation of all-solid-state batteries is accelerated, this increase is expected to rise to 51 times!

Some experts frankly say that if we rely on existing lithium production projects under construction, there may be a nearly 50% demand shortfall in global lithium resources by 2030.

According to SMM Prices, as of June 9, the spot price of spodumene concentrate (6%, CIF China) rose by $20/mt to $4,740-4920/mt, with the average price quoted at $4,830/mt, up $1,935/mt or 66.84% from the low on April 1.

In terms of lithium salt, domestic battery-grade lithium carbonate prices start to rise again after stabilising for a long period of time, which rose again by 1,000 yuan/mt on June 9 to 458,000-475,000 yuan/mt, with the average price reported at 466,500 yuan/mt.

According to SMM research, on the supply side, lithium carbonate supply rose 6% MoM as new capacities ramped up the production and the production of brine lakes has peaked. The demand side saw the increase mostly contributed by LFP materials by 19%. The supply-demand balance may turn to small deficit again. Salt factories are generally optimistic about the price trend, and there have been transactions with high prices. It is expected that lithium carbonate prices will maintain small growth in the near future.