European Lithium Supply Chains: Reducing Dependence on Chinese Lithium Hydroxide Monohydrate (LHM)

04/02/2025

In its efforts to transition to a low-carbon economy and set up a sovereign, sustainable and competitive battery supply chain, Europe is confronted with a pressing challenge: its heavy reliance on Chinese refined battery materials, particularly Lithium Hydroxide Monohydrate (LHM). This dependency has profound implications for the region’s energy security, the competitiveness of its nascent battery and Electric Vehicle industries and in the end Europe’s economic stability.

As highlighted by the European Commission, lithium is a critical material in the energy transition. Several initiatives are already in motion to secure a more localised lithium supply chain, but progress is slow, and the People’s Republic of China (China) threatens to impose export restrictions on battery and lithium processing related technologies.

Europe’s Urgent Need to Reduce Dependence on Chinese Lithium Hydroxide Monohydrate

While the slowing EV penetration in Europe and the resurfacing LFP (Lithium Iron Phosphate) vs Li-NMC (Lithium Nickel Manganese Cobalt) debate may impact short term forecasts for lithium compounds demand in the region (see here for more details), high nickel NMC demand is set to dominate European battery demand with >95% of European Cathode Active Manufacturers (CAM) and >70% gigafactory projects under construction over 2024-28 relying on this technology according to Viridian Lithium’s estimates. This should support growing demand for battery-grade lithium hydroxide over carbonate in Europe.

Europe’s dependence on Chinese refined lithium is a critical issue. China dominates the global refined lithium market, controlling 82% of the global refined capacity for Battery Grade Lithium Hydroxide Monohydrate (BG LHM) in 2024 and 60% for Battery Grade Lithium Carbonate . This reliance poses several risks:

  • Supply Chain Vulnerability: Any disruption in Chinese refined lithium exports, whether due to geopolitical tensions or internal policy changes, can severely impact Europe’s battery supply chain.
  • Economic Risks: Dependence on a single supplier can lead to price volatility, affecting the cost of lithium-ion batteries and, consequently, the entire electric vehicle (EV) market.
  • Energy Security: Lithium is essential for producing batteries used in EVs and renewable energy storage systems. A stable and secure lithium supply chain is crucial for Europe’s energy transition and achieving its climate goals.

 

 

 

 

According to the European Commission, the global demand for lithium is projected to increase 14-fold by 2040 compared to 2020 levels. The exponential growth of EVs and energy storage systems should drive this surge. By 2030, according to our estimates, European demand for battery-grade lithium hydroxide is expected to range between 210,000 and 270,000 tons per year Lithium Carbonate Equivalent (tpa LCE) leaving the region dependent on imports unless domestic integrated and refining capacities are built.

European integrated projects will not cover future LHM needs in the region

In Europe, the only existing capacity to produce battery-grade lithium chemicals is in Russia (15,000 tpa LCE) and Germany, where AMG has commissioned a 20,000 tpa LCE refiner of Technical Grade LHM into Battery Grade LHM in September 2024. In the United Kingdom, Leverton-Helm is estimated to have a refining capacity of less than 4,000 tpa LCE per year. Albemarle and Arcadium (Rio Tinto) have relatively small-scale production facilities in Germany and the UK respectively for specialty chemicals such as butyllithium, technical grade lithium hydroxide monohydrate and lithium chloride.

Consequently, Europe’s lithium needs rely almost entirely (approximately 90%) on BG LHM imports from China.

Most European governments consider this a threat to the regional battery supply chain and have consequently launched national and regional initiatives to promote a domestic lithium industry.

Back in April 2024, the EU has adopted the CRM Act or Regulation (EU) 2024/1252. The CRM Act establishes a framework to guarantee a secure and sustainable supply of critical raw materials (CRMs), notably supporting the development of a local lithium industry. The CRM Act:

  • Sets ambitious targets to ensure coverage of the EU’s consumption of strategic materials, including lithium, at >10% at the extraction level, >40% at the refining level and > 25% in recycling by 2030. The regulation additionally sets a maximum dependency threshold of 65% on any single third country;
  • Introduces the Strategic Project status for ESG-friendly projects that can achieve a meaningful contribution to the security of the EU’s supply of CRMs within a reasonable timeframe or with a sufficient level of confidence. Obtaining this status for should guarantee fast-tracked permit-granting process and access to additional financing, whether coordinated or not (subsidies, public funding, etc.) for any selected project.

Currently, there is no integrated mine-to-product lithium production in Europe. Only the Keliber project in Finland (15,000 tpa LCE) is under construction. While there are many geological occurrences of lithium deposits across the region, most European lithium projects are based on unconventional resources and therefore carry a high degree of environmental, technical and financial risk. European integrated projects are at various levels of maturity. Not all projects will be economically viable and therefore unlikely to meet regional demand, especially considering lengthening permitting and financing timelines.

The development of a lithium refining industry is therefore necessary to reduce Europe’s dependence on (Chinese) imports.

 

European LHM demand highlights a persisting supply gap

(source: Viridian Lithium)

Viridian Lithium, a Key Step in the Battery Value Chain

Refining is an essential part of the battery value chain: it contributes to securing critical raw materials and is a necessary step for a robust and reliable battery recycling industry in Europe. This topic is particularly sensitive in the case of BG LHM, which requires a high level of purity and is a key component for ternary batteries developed by most European gigafactories.

Viridian Lithium’s completed Class 3 (AACEi) Feasibility Study, permitting progress and experienced process team make Viridian’s project the most mature and advanced lithium refinery project in Europe. Viridian Lithium is focused on building its lithium conversion plant in Lauterbourg with an initial production capacity of 28,500 tons per year of lithium hydroxide monohydrate, starting in 2028.

Viridian Lithium alone will contribute significantly to the CRM Act’s ambition by covering 25% of the local battery grade lithium hydroxide refining objective by the end of the decade. Viridian Lithium will also assist the CRM Act’s ambition for lithium recycling thanks to its in-house intellectual property for processes designed to refine various lithium materials potentially produced by battery recycling customers.

Viridian Lithium is dedicated to strengthening Europe’s battery supply chain through its expertise in lithium refining.  The company’s initiatives include:

  • Sustainable Lithium Production: Viridian Lithium focuses on refining lithium carbonates from brines, recycled and geothermal sources, which are more environmentally friendly compared to traditional mining methods. This approach minimises ecological impact and aligns with Europe’s sustainability goals.
  • Local Production Facilities: By establishing production facilities within Europe, Viridian Lithium reduces the continent’s reliance on imported lithium chemicals. This not only enhances supply chain geostrategy, but also creates local jobs and stimulates economic growth.
  • Innovation and Technology: Viridian Lithium invests heavily in research and development through its in-house laboratory with state-of-the-art equipment to improve lithium extraction and processing technologies. Their innovative methods ensure a high-quality and sustainable lithium supply. Viridian Lithium’s proprietary IP on the treatment of various lithium chemicals within our Lithium Recovery Unit could establish the company as a key refining hub for recycled lithium chemicals in Europe.
  • Strategic Collaborations: The company collaborates with other European firms and research institutions to strengthen the local lithium supply chain. These partnerships are crucial for building a robust and resilient battery supply chain in Europe.

Viridian Lithium’s commitment to sustainability is evident in its low-carbon production processes. We aim to produce battery-grade lithium chemicals with the lowest carbon intensity in the world, leveraging France’s low-carbon energy mix.

 

 

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