Battery Metals: 5 Trends to Watch in Europe

What battery metals trends should investors watch in Europe?

1. Securing supply is a must — but European production won’t be enough

Similar to North America, Europe is moving ahead with a push to secure supply of key metals used in EV batteries, including lithium, cobalt and graphite. Exploration and development projects are underway in the region, with some even looking at new technologies to bring fresh supply online.

However, at present, Europe’s local production of battery metals is very small in comparison to what it needs to meet its own needs. That’s why a key question remains: Where will it source its raw materials in the coming years?

“We see Europe requiring close to 800,000 tonnes of battery-grade lithium chemicals by 2030,” Infinity Lithium (ASX:INF) CEO Ryan Parkin said during a panel. “Today there's close to 700,000 tonnes globally. So there's going to be some fair challenges as we move forward within Europe to secure key raw materials and downstream conversion capacity.”

2. Regulation is critical in helping Europe gain a leading role in the energy transition

If there’s one theme that continues to come up in the battery raw materials space, it is how regulation can support — or not support — the buildout of supply chains. For the upstream sector, permitting continues to be a challenge, with mining projects being halted for months before being given the green light, if they are at all.

In Europe’s battery metals sector, a prime example is Rio Tinto’s (ASX:RIO,LSE:RIO,NYSE:RIO) US$2.4 billion Jadar lithium project in Serbia, which the government blocked after massive environmental protests. Europe is soon to announce its Critical Raw Materials Act, and the expectation is that regulations for mining projects will be in focus.

“Europe is very underexplored. So there are plenty of opportunities for raw materials to be found in Europe and elsewhere,” Massimo Gasparon of the European Raw Materials Alliance said. “So the supply itself is not the problem, the problem is the permitting, and that needs to be addressed and hopefully will be addressed in the (Critical Raw Materials) Act.”

3. Refining and cell production is set to grow

Even though China’s share of mining might not be huge, it currently dominates the refining space, with about 75 percent of lithium refining capacity located in the Asian country.

But the midstream sector is growing in Europe. Green Lithium is building one of the first lithium refining plants in the UK, while Luxembourg-based Livista Energy is outlining plans to build standalone lithium conversion facilities in the region.

For Akanksha Middya, head of supply chain and operations strategy at battery manufacturer Britishvolt, there are two main challenges to consider in this growing sector: research and development and actual manufacturing capabilities.

“It's about being very agile and scalable when it comes to specific requirements for the (original equipment manufacturers), as a lot of that is still very much in flux,” she said.

4. ESG is core, recycling’s time will come

ESG standards have been top of mind for investors, with the emphasis on ESG increasing steadily in recent years — and battery metals mining projects are no exception.

“ESG, literally, is number one on the list,” Orion Resource Partners' Philip Clegg said during a panel discussion. “We don't do anything these days without ensuring that it is international best practise.”

In Europe, there’s still work to be done in terms of measuring progress and providing a methodology to follow.

“I think it is much needed in Europe to have this methodology in place, and mainly confidence that what we measure is comparable with the global standard as well, and … hopefully not only greenwashing,” said Ilka von Dalwigk, policy manager at EIT InnoEnergy and the European Battery Alliance.

Recycling will also play a big role in the battery metals space, just not quite yet. The reality is that currently recycling is still in its early stages, but by the next decade it could be supplying most of the new demand for battery metals.

5. Strategic investment is needed

Finally, in order to get enough supply, there’s one thing Europe won’t be able to escape — the need for strategic investment.

“No one wants to invest into something that might not happen. So there needs to be a certain level of certainty when it comes to the permitting,” Gasparon said. “Not only certainty, but also things need to happen much faster than what’s happening right now.”

Investing in Europe is very different from investing in Canada, in the US, in Australia and in other emerging markets, Clegg said.

“The thing that everybody thinks about when investing in Europe is ESG,” he said. “Can we actually get this done? And the question actually just pervades everything that you look at when you have an opportunity. Because even when, and if, you have got permits in Europe, you still might not have the social license to operate.”