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Sector Note -
This quarter’s topic: We take another look at lithium, this time from the perspective of the recently refreshed Strategic Battery Value Chain initiative in Europe. Recent investment proposals, in particular by the Volkswagen Group and by Swedish battery start-up Northvolt, show that the European car industry is finally getting serious about capturing the lithium battery value chain. Construction is about to start on the first of several European integrated Gigafactories, intended to take intermediate raw materials and convert them into fully assembled lithium batteries for both the EV market and the fixed storage market. Unfortunately, the planned value chain is by no means complete; in particular, there is a gap between mining and concentrating spodumene (and possibly other lithium minerals) and the current entry point planned by the battery manufacturers. This gap is essentially the refining stage, producing lithium hydroxide or lithium carbonate. There are at least six projects within Europe that are planning integrated mines and refineries but we contend that most of these will not get built as the economic returns are too low for what are relatively high-risk investments. This leaves a gap that will have to be filled by toll refineries.