EU eyes Latin American minerals to offset China's dominance

As Europe looks to lessen its dependence on China as a major supplier of minerals in its progress towards decarbonization, attention turns to Latin America, especially its lithium. 

However, regulatory uncertainties in Chile, Bolivia and Mexico mean that by 2030 about 63% of the global lithium supply will come from hard rock and not brines, said Michael Schmidt, a geologist at the German mineral resources agency DERA.

"The ability to convert spodumene will be key to future supply," said Schmidt about the lithium silicate available in rocks that prevails in countries like Australia, Canada, China and Finland. In contrast, in Latin America, which has more than 70% of global lithium resources, the metal is extracted mainly from brines.

The shortage of lithium and other minerals will continue to persist "if the industry and governments do not take the necessary actions and investments. Given this scenario, only recycling would be the solution," Schmidt said.

According to an article in German outlet Deutsche Welle, the European Union imports between 75% and 100% of the metals its industry needs, with China being the main supplier both of raw materials and processed minerals.

Europe’s geopolitical strategy aims to avoid a situation similar to that experienced with Russia regarding natural gas being used for political motives. While the University of Louvain has predicted that Europe will face a shortage of lithium, cobalt, nickel, copper and rare earths in the next 15 years, a recent report by consultancy firm McKinsey put the date for nickel and lithium shortages at 2025.

That situation worries the EU, since the demand for minerals to manufacture of batteries for electric vehicles will represent 90% of global lithium output by 2030 and could rise to 560,000t, Schmidt said at an event organized on Wednesday by the Chilean-German Chamber of Commerce and Industry. The event was one of the initiatives of the EU and Latin America to advance in the integration of industrial value chains.

The EU’s 27 member states committed to the Green Deal to achieve carbon neutrality in 2050, including a reduction of emissions by at least 55% compared to 1990 levels and installing 40% of renewable energies by 2030.

Electric batteries, wind turbines, and expanded power grids are just a few of the areas that require large amounts of minerals. In 2020, the World Bank estimated that mining production should increase by 500% by 2050 to support climate goals.

While Russia has been a major source of fossil fuels, China dominates the processing of several critical minerals, refining around 60-70% of the world's lithium, nickel and cobalt.

As a result, the EU seeks to strengthen cooperation with Latin America to expand lithium supply, despite the fact that extraction from brines, in countries such as Chile and Argentina, could become obsolete with technologies capable of extracting up to 95% of lithium in spodumene, Schmidt said.

Currently, Australia remains the leading producer of lithium globally, extracting the metal from rocks.

Challenges also continue to be imbalances in global supply chains caused by the war in Ukraine, which has hit Europe severely, along with inflation and high interest rates.

“If [the supply chain] continues to shrink, it could cause the complete shutdown of the industry,” Peer Hoth, director of mineral resources at Germany’s economy and climate protection ministry, told the event. The world needs steel, rare earths, copper, lithium, selenium and zinc, among other minerals, which do not exist in Europe, Hoth said.

Along with the European economic slowdown, the outlook could worsen with the entry into force in 2023 of the EU supply chain law that will bring more demands on companies in the management of environmental risks and human rights, he added.

Germany is developing clean technologies for mining, especially for the production of zero-emissions steel that could serve as the basis for advancing in the scope of green copper in the next 6-7 years, said Marcela Angulo, vice president of technology suppliers’ association Minnovex.