Breaking Free from China: The EU's Road to Lithium Independence

The European Union has introduced guidelines aimed at reducing its dependency on China for 34 critical raw materials essential for the future economy, including lithium. Can this ambitious plan succeed?

by Sededin Dedovic
Breaking Free from China: The EU's Road to Lithium Independence
© Sean Gallup / Getty Images

Residents of Bitterfeld-Wolfen are accustomed to the chemical industry. However, a lithium refinery is a new facility in the industrial park of this eastern German town. So new, in fact, that it is the first of its kind in all of Europe.

The AMG Lithium plant in Germany will play a key role in the EU's quest for its own industry in this field. The facility will enable the supply, processing, and refining of lithium into battery products, thus supporting the European battery industry—without Chinese lithium.

At least, that’s the plan for 2028, when, according to AMG, they will be able to eliminate the Chinese middleman. This should put the EU on the right path to achieving the ambitious goals it has set for itself. This involves recycling, refining, and procuring 34 so-called critical raw materials, including lithium, phosphorus, and bauxite, as well as rare elements like niobium.

The EU's Critical Raw Materials Act (CRMA) came into force at the end of May, marking the first comprehensive European strategy for sourcing minerals and metals. The ambitious goals of this law are meant to stimulate domestic extraction, processing, and recycling.

By 2030, the EU should not consume more than 65% of any critical raw material from third countries annually—a difficult target considering the current supply chains. "To be able to compete geopolitically with other major players like China and the USA, it is very important that CRMA allows for the coordination of needs and demands of various member states," said Melanie Müller from the German Institute for International and Security Affairs in an interview with DW.

CEO of Deutsche Lithium GmbH, holds a rock of Zinnwaldite, a silicate mineral that contains lithium© Sean Gallup / Getty Images

China Dominates the Market

The EU’s demand for rare earth minerals is currently met by imports from China, reports the European Commission in review.

China dominates global metal markets, particularly in mining, and especially in controlling the processing and refining of raw materials. In Europe’s attempt to diversify supply chains and initiate a green transition, China’s influence is increasingly seen as a threat.

"Whether we're talking about chips for virtual reality or cells for solar panels, both the green and digital transitions will be driven by raw materials. Lithium and rare earths are already replacing gas and oil at the heart of our economy," said European Commission President Ursula von der Leyen back in 2022.

To achieve the EU’s new goals, new mines will have to be opened in Europe—at least 10% of the entire Union’s consumption should be covered by local mining by 2030, compared to the current 3%. However, mining requires time and money.

"On average, it takes 17 years to develop a lithium mine from the initial discovery to the start of production," said Alice Yu, an analyst at S&P Global Commodity Insights. Stefan Scherer from AMG estimates that the investment costs for producing lithium hydroxide from a new deposit would range between 500 million and 1 billion euros.

What About the Money?

The first module of the plant being built in Bitterfeld-Wolfen is expected to cost around 140 million euros, with 5 million provided by the government of the German state of Saxony-Anhalt. But investing in such projects is risky due to price fluctuations that can unpredictably threaten company profits.

For instance, the price of lithium has fallen by 80% since 2022. "People are very, very cautious when investing money in lithium projects at the moment because, at current price levels, it is very difficult to initiate investments," said Scherer.

A joint initiative by the governments of France, Italy, and Germany might help: these countries have collectively pledged about 2.5 billion euros in public investments. But this money might not be enough. Analyst Yu said that to achieve the EU's 2030 goal for lithium alone, several more billion euros will be needed.

What could help is attracting private capital. And here, paradoxically, belive or not, China might come to the rescue. In an interview with DW, Yu stated: "When we talk about diversification without China, we mainly think about avoiding imports from China.

But so far, the EU has collaborated with, for example, Chinese investors in battery production in the European Union. So, will they try to collaborate with Chinese experts and capital in lithium refining as well?" The EU's ambitious strategy to reduce dependency on China for critical raw materials, such as lithium, is crucial for its future economy and green transition.

While initiatives like the AMG Lithium plant in Germany mark significant steps, achieving these goals will be challenging due to financial, logistical, and time constraints. Attracting private investment and potentially collaborating with Chinese expertise could be essential.

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