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The east German city on the centre of the brand new ‘gold rush’ … for lithium | The Global Today

It has been referred to as the brand new gold rush – a rush to meet up with China in producing and refining the supplies wanted in every little thing from computer systems to automobiles: however has it come too late to avoid wasting Europe’s automobile business?

Deep inside a former East German city lies the primary fruits of the EU’s grand plan to “de-risk” and wean itself off dependency on imports for the inexperienced revolution. In Bitterfeld-Wolfen, 140km south-west of Berlin, an Amsterdam-listed firm is scrambling to finish building of an enormous manufacturing facility that would be the first in Europe to ship battery-grade lithium.

There may be now a race throughout Europe to each mine the silver-white mushy steel and manufacture its refined kind, lithium hydroxide – the important thing ingredient within the batteries that energy electrical automobiles, robotic vacuum cleaners and cell phones.

“Everyone needs to get entry to lithium. That is possibly why they name it the white gold, as a result of it is sort of a gold rush,” says Stefan Scherer, chief govt of AMG Lithium. “It’s this environment: ‘Wow, I’ve to be on this recreation’. There may be nearly no firm coping with uncooked supplies that’s not wanting into lithium. It’s simply too engaging.”

The EU is in a rush, having come to the late realisation that it’s over-reliant on China for a number of essential uncooked supplies, 16 of which are actually listed by Brussels as priorities in a brand new industrial technique designed to guard the bloc’s financial system and obtain the bold purpose of decreasing web greenhouse fuel emissions by at the least 55% by 2030.

A man in a blue hard hat and yellow hi-vis vest poses for a photo with one hand on a safety rail in front of factory equipment
Stefan Scherer, chief govt of AMG Lithium on the new plant in Bitterfeld-Wolfen, which is about to supply the primary battery-grade lithium within the EU later this 12 months {Photograph}: Kristin Bethge/The Observer

The dependency can also be unnerving German and different European automobile producers, whose house markets are actually threatened by good-quality Chinese language automobiles and China’s management of the processing of lithium.

Concern is so nice that the European Fee president, Ursula von der Leyen, has launched an anti-subsidy investigation into Chinese language imports, amid fears that huge producers together with Volkswagen and BMW could have hassle matching the provision of electrical automobiles from China.

However lithium doesn’t, in the primary, come from China, so how has Beijing achieved such a commanding place? Was Europe asleep on the wheel?

Lithium provides are dominated by 5 international locations, with the majority of the mineral mined in Australia and Chile, however it’s China that has taken the uncooked materials and change into the dominant provider of refined lithium.

“They’re now the worldwide hub. This offers them financial leverage – or, to place it extra bluntly, the technique of financial coercion,” says one EU supply.

The seeds of the EU’s dependency on China had been sown within the Eighties after the oil disaster, when then Chinese language chief Deng Xiaoping noticed: “The Center East has oil. Now we have uncommon earths.”

A pile of white powder. Standing next to it is a small transparent bottle labelled ‘AMG lithium’ full of the same powder
Lithium is a silvery-white substance that appears like sugar crystals in its dried kind.

Uncommon-earth supplies had been as soon as present in abundance within the US, Europe and Japan, however traders in these areas retreated from mining, which was seen as a grimy and costly business, handing an enormous market to China, which set about shopping for the world’s inventory to change into the worldwide hub it’s right this moment.

The Russian invasion of Ukraine has introduced that lopsided commerce relationship into sharper focus.

“Lithium and uncommon earths are already changing fuel and oil on the coronary heart of our financial system. By 2030, our demand for these uncommon earth metals will improve fivefold,” Von der Leyen warned final 12 months in her 2022 state of the union handle. “Now we have to keep away from falling into the identical dependence as with oil and fuel.”

So the EU has set about pushing by way of efforts to scale up inexperienced applied sciences with the Crucial Uncooked Supplies Act, which it handed earlier this 12 months “in document time”, in line with Peter Handley, head of the uncooked supplies unit within the fee.

It relaxes state support guidelines to compete with the US’s Inflation Discount Act, and raises targets for extraction inside Europe, and for recycling of merchandise, similar to telephones, which include lithium. If all goes to plan, it ought to change into a regulation within the EU this month. “It units the extent of ambition,” says Handley.

Earlier than a visit to Latin America to tie down offers on uncooked materials manufacturing, Von der Leyen instructed reporters that the EU had “a 97% dependency the place lithium is anxious on China”.

Again in Bitterfeld, Scherer surveys the huge plant that’s going to assist change that. He factors to 20-metre- excessive steel vats for lithium options, drying machines that produce a substance just like sugar crystals – simply one of many processes that create the ultimate refined product earlier than it may be shipped to purchasers anticipating the primary batches of EU-made lithium.

AMG Lithium expects to be operational by the top of 12 months and has orders stretching into 2026, with demand for recent lithium salt in Europe forecast to rise to 500,000 tonnes a 12 months by 2030.

“We plan to supply 100,000 [tonnes] of that,” says Scherer –sufficient to offer the lively charging ingredient in 2.5m automobiles.

Scherer says it’s “completely” essential that the EU scale back its dependency on China for refined uncooked supplies however is decidedly of the view that it shouldn’t reduce hyperlinks totally.

Bitterfeld-Wolfen map

“You’ll be able to’t inform a enterprise associate: ‘Oh, you do the little-value small stuff and we are going to do the remaining’,” he says.

The Chinese language producers have already got a 10-year headstart on the EU’s motor business and “now they’re constructing automobiles – not unhealthy automobiles – and so they need to promote them in addition to the battery cells,” he says. “It’s a must to stay with this truth.”

Catching up might be an extended and costly course of. To get from opening a mine to producing battery-grade lithium can take seven years. “To open up a mine and construct a totally fledged manufacturing chain – that’s possibly $750m,” says Scherer. “The factor with chemistry is that it’s a capital-intensive business.”

So is the EU just too late to cease China overwhelming the home automobile business?

Chinese language conglomerates similar to BYD (Construct Your Goals) began making electrical batteries way back to 1995 and are actually constructing their very own electrical automobiles.

“I see the German automobile business in decline,” says an EU business supply. “It’s fading away due to the lack of managers to do the proper issues. It’s such a tragic story. It’s a little bit bit just like the dinosaurs. They’ve misplaced the flexibility to innovate.”

Notably, China overtook Turkey to change into the EU’s top country of origin for car imports throughout all gasoline sorts final 12 months. European manufacturers nonetheless account for 70% of the bloc’s battery-electric automobile market, however China’s share has risen from 0.5% in 2019 to 4% in 2022 at a time when all-electric fashions have exceeded 20% of complete automobile gross sales within the EU for the primary time.

And China is already driving costs down. Having launched three electrical automobiles in Europe final autumn, BYD has now added two extra to its vary, with costs for the smaller mannequin beginning at €29,990 (£25,632) and going as much as €36,740 – considerably beneath the price of similar-size European electrical autos (EVs), which begin at €35,000 or extra.

However Sigrid de Vries, director normal of the European Vehicle Producers’ Affiliation, says the business wants greater than only a house provide of lithium to battle again. Like many, she thinks the quickest approach to transition from petrol and diesel is to supply monetary incentives to customers.

“There isn’t any query that affordability is a stumbling block for European electrical car uptake,” says De Vries.

“Each the US and China are additionally extra bold than most EU member states of their buy incentive and tax profit schemes, which scale back EV prices for customers.”

She additionally argues that due to the rules-of-origin regime within the Brexit deal, tariffs will hit the business exhausting except they’re suspended.

“The UK market – the EU’s high vacation spot for automobile exports – offers a obvious instance of the place cost-competitive Chinese language EVs might considerably dent European automakers’ market share,” she says.

She provides: “If the present guidelines of origin on EU-UK car commerce usually are not prolonged by three years, the lack of market share to Chinese language-made EV imports might price European producers €4.3bn and reduce EU-made EV manufacturing by as much as 480,000 items.”

So as to add to the Brexit deal issues, carmakers even have a battle on their fingers to get political assist towards Chinese language rivals, with EU inside market commissioner Thierry Breton warning on Friday that the EU’s job is to not favour one a part of an business over one other.

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