© Green Lithium Refining Ltd

Commodity trader Trafigura is set to take a stake in a start up company behind ambitious plans to supply car and battery makers in Europe with lithium from a UK refinery.

As part of the investment, Trafigura, one of the world’s biggest metal traders, would source Green Lithium with feedstock for its planned 50,000 tonne a year plant in the north of England and sell the finished product to customers across Europe.

It would be Trafigura’s first big deal in lithium and comes as Russia’s invasion of Ukraine has highlighted the perils of being too reliant on one country for commodity supplies.

Trafigura estimates that more than 90 per cent of the world’s battery grade lithium is produced from refineries in China, which also processes the vast majority of cobalt and nickel, other key battery materials.

Socrates Economou, head of nickel and cobalt at Trafigura, said there were a lot of large gigafactory battery projects under development in Europe and North America. “The question is where are they going to get the raw materials that go into the batteries.”

Most of the lithium used in electric car batteries is currently extracted from brines in Chile and Argentina and from rock dug up in Australia which is then processed in China, often using fossil fuels.

There are currently no commercial refineries in Europe, making the region’s car and battery makers almost totally reliant on China for supply.

“Ninety per cent of Australia’s lithium production . . . is tied up with Chinese refiners because there is no other capacity in the world,” said Economou.

Benchmark Mineral Intelligence, an industry consultant, forecasts 117,000 tonnes of lithium demand for batteries in Europe this year, rising to 250,000 tonnes in 2025 and 600,000 tonnes by 2030. From 2024, battery and car manufacturers in Europe will also face high tariffs if they do not source raw materials locally.

The agreement with Trafigura is a vote of confidence in Green Lithium, which hopes to secure the approvals required for its project by the end of the year. It has yet to disclose the site it has chosen in the North of England but expects to do so soon.

The company, which started work on the project four years ago, raised £1.6mn in seed funding last year from investors and has also secured a £600,000 grant from the UK government.

It produced its first battery grade lithium hydroxide — the product favoured by carmakers — under laboratory conditions last year and is in the process of raising capital to see it through to a final investment decision. It hopes to have the refinery running by the end of 2024.

The company says the plant will use low-carbon refining technology and once at full capacity will produce enough lithium to support the production of 1mn electric vehicles a year. It plans to sell the waste produced when converting lithium-containing spodumene ore into the refined product to the construction industry.

Green Lithium said the project will support 1,000 jobs in the construction phase and 200 once operational.

Chief executive Sean Sargent said Trafigura was the “perfect match” for the company. “It is also willing to make a key equity investment,” he said. Trafigura has not disclosed how much it will invest.

The price of lithium hydroxide has surged 140 per cent this year to more than $65,000 a tonne as electric vehicles sales have risen, according to Benchmark Minerals.

However, the increase is starting to unsettle carmakers. Tesla’s Elon Musk recently said lithium had gone to “insane” levels and was now the “fundamental limiting factor” in the growth of electric vehicles. He also said the company might consider mining or refining lithium.

Get alerts on Electric vehicles when a new story is published

Copyright The Financial Times Limited 2022. All rights reserved.
Reuse this content (opens in new window) CommentsJump to comments section

Follow the topics in this article