It could be a challenging environment for lithium prices, according to advisory firm Clean Energy Associates, which predicts low prices through 2028. In the meantime, growth prospects in the European Union (EU) could give rise to some bullishness.
The Wall Street Journal reported “new lithium mines are set to open across Europe in the next few years.” This comes as the EU is attempting to loosen China’s grip on the lithium market that it handily dominates as the world transitions to reliance on clean energy technology.
Lithium features in applications such as electric vehicle (EV) batteries. With China’s stranglehold on the lithium production market, 97% of the lithium used in the EU comes from the second largest economy.
“We are totally dependent on China,” said President of the European Commission Ursula von der Leyen at a clean technology conference earlier this year, as reported by the Wall Street Journal.
Breaking Free From China
According to the Organization for Research on Chin and Asia (ORCA), China occupies 80% of global lithium chemical production. As such, Europe is looking to break free from that dependence by looking to reduce at least 10% of its annual consumption by 2030, according to the recently enacted Critical Raw Materials Act, as reported by the Wall Street Journal.
Of course, the challenge is to lure capital investments into lithium mining production projects. But given the current prices, easier said than done. The WSJ report noted China can capitalize on cheap labor and energy. And financing from state-controlled banks is available to make lithium mining worthwhile.
“[Europe] is in a difficult place to be able to catch up. To get the know-how and to be able to do it at a similar price is a big ask. If you look at things like capex, labor and energy, it’s a big hurdle,” said William Adams, base-metals analyst at Fastmarkets.
Whether Europe’s goals to ramp up mining produce is a tangible effect on lithium mining equities is questionable. However, if the opportunity to access lithium at weaker prices may present a value opportunity. That said, consider getting miner exposure via the Sprott Lithium Miners ETF (LITP ). It tracks the total return performance of the Nasdaq Sprott Lithium Miners Index. That index aims to track the performance of a selection of global securities in the industry. That industry includes producers, developers, and explorers.
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