Explosive atmosphere in the lithium triangle – Europe stands to benefit: Albemarle, European Lithium, Mercedes-Benz

Albemarle and Co. are looking for alternatives

In January 2024, indigenous groups temporarily blocked access to the Salar de Atacama – the world's largest source of lithium – in protest against new mining contracts from which they felt excluded. Albemarle and SQM, which mine lithium there, were able to continue working as normal for the time being; however, the incident highlights the risk of unilateral dependencies. At the same time, the EU reports that lithium demand is rising exponentially due to the boom in electric vehicles – EU Commission President Ursula von der Leyen predicted back in 2023 that demand for lithium would be 17 times higher than it is today. Although electric vehicle sales are currently sluggish, demand is expected to continue rising. Europe is anything but diversified in this regard: as recently as 2023, Der Spiegel reported that European companies source 97% of their lithium from China. This dependence is likely to remain high today.

Mercedes-Benz relies on lithium from various sources

Companies such as Albemarle, which for years exemplified the gold rush atmosphere in South America's lithium triangle, are already looking for alternatives. In Australia, Albemarle holds shares in the Greenbushes mine, disused lithium mines like Kings Mountain are to be revived in the US, and the Company is also looking into acquisitions – all this is being done to secure multiple sources of raw materials and cushion the impact of supply shortages. German automaker Mercedes-Benz recognized the problems with lithium supply early on and signed a supply agreement with a Canadian company in 2022, whose processing plant is expected to deliver around 24,000 tons of lithium hydroxide per year from Brandenburg starting in 2026. The raw material for this comes from mines with a sustainable concept. Lithium recycling is also set to play a major role for Mercedes-Benz. The automaker has built a battery factory in Kuppenheim, Baden, for this purpose.

European Lithium: The Wolfsberg mine in Austria set to start production in 2027

Mercedes-Benz is consistently pursuing a multi-source strategy for lithium. In view of rising freight rates, customs duties, and increasing geopolitical conflicts, Europe is once again becoming a stronger focus for the industry. Bavarian sports car manufacturer BMW has already signed a purchase agreement with European Lithium. From 2027, European Lithium plans to mine the "white gold" in Wolfsberg, Austria. Current media reports estimate that Wolfsberg alone could account for around 4.5% of global lithium production. A plant for converting Austrian ore into lithium hydroxide is already being built in Saudi Arabia in collaboration with Arabian New Energy. Thanks to the low energy prices there, processing costs are expected to be a whopping 80% below European levels.

The start of production at the end of 2027 could come at just the right time for European Lithium – the Company expects European demand for lithium to rise by 1,200% by the end of the decade. The issue of diversification is also likely to be even more important to major car manufacturers since the outbreak of the war in Ukraine and Trump's presidency. It cannot be ruled out that European Lithium will be able to convince other European partners besides BMW. The mine's location, not far from Austria's capital, Vienna, and the low costs of further processing the lithium in Saudi Arabia are good arguments in times of growing uncertainty. Although supply from the South American "lithium triangle" has not yet dried up, an escalation of the conflict between indigenous peoples and lithium producers does not seem unlikely - here too, US President Donald Trump has set new standards with his protectionist policies and some reckless decisions.

Europe becomes the new lithium hotspot

All market researchers and analysts expect lithium demand to rise sharply by 2030. However, production has so far been concentrated in China and South America. Lithium buyers will want to reduce this regional risk. Europe has a special role to play in this context. Here, legal certainty, proximity to automotive production sites, and low energy costs thanks to cooperation agreements in the Middle East create an unparalleled mix. Given this outlook, European Lithium shares are promising.