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Europe proposal to classify lithium as toxic could hinder battery supply chain


First draft of act to be published in Q4

Could be 'unintended consequences' for investment: Lithium Association

Many industry players have opposed the proposal

  • Author
  • Jacqueline Holman
  • Editor
  • James Leech
  • Commodity
  • Oil Metals

The European Commission is contemplating classifying lithium as toxic, which could hinder the EU's aims to create and support a domestic battery materials supply chain, market participants told S&P Global Commodity Insights.

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At the end of 2021, the European Chemicals Agency's Risk Assessment Committee agreed with French proposals to classify lithium carbonate, lithium hydroxide and lithium chloride as Category 1A reproductive toxicants, as they may damage fertility, unborn children and harm breastfed children.

Initial proposals were presented to the EC in March and are now under review and consultation, with the first draft of an act reclassifying lithium compounds to be published between October and December.

"The risk is that if lithium salts are incorrectly reclassified as 1a/SVHC it would introduce great uncertainty to long-term business viability planning of investments around these three salts," International Lithium Association Secretary General Roland Chavasse told S&P Global.

He added that, under EU chemical regulations, a category 1A classification makes a substance eligible as substance of very high concern, or SVHC, which results in its use being restricted by the EU's Chemical Strategy for Sustainability.

The imminent revision of the Registration, Evaluation, Authorisation and Restriction of Chemicals, or REACH, regulation could also further change the regulatory regime for SVHCs.

"Therefore, should any of these three lithium salts be classified incorrectly as 1a and be placed on the SVHC there could be significant unintended consequences for investments in their use in the EU, thereby putting in question the long-term viability of lithium being produced, refined, used and recycled in EU member states," Chavasse said.

Lithium prices have been strong in 2022, with the Platts seaborne lithium carbonate and lithium hydroxide assessments up 114.5% and 139.70%, respectively, since the start of 2022 at $72,500/mt CIF North Asia and $76,000/mt CIF North Asia June 24.

"We as battery manufacturers, together with the complex inorganic color pigments, lubricants and greases, and vehicles industries have concerns because an unjustified 1A classification would severely impact investments in Europe's lithium value chain and make achieving the EU Green Deal objectives unrealistic," Eurobat EU Affairs Director Giorgio Corbetta told S&P Global.

Eurobat had, therefore, called on the EC to refrain from including a 1A classification for the lithium salts in the adaptation to technical progress, or ATP, proposal, he said.


There had been no indications if the proposal would be approved, Vulcan Energy Resources Chief Commercial Office Vincent Ledoux Pedailles told S&P Global, adding that it seemed "pretty unlikely that given the EU objectives of becoming self-sufficient in EV lithium-ion battery production by 2025, targeting 80% domestic lithium production in the next five years, targeting 35% lithium recycling by 2029, they will then approve such proposal that can be seen as counterproductive."

A number of industry players, including Vulcan, have opposed the proposal and directly communicated this to the EC, he said.

Vulcan understood that there were efforts within the EC to cancel the proposal and, if it went ahead, the EC could potentially grant a special status to certain countries, allowing then to waiver on the 1A classification for specific industries/activities, Pedailles said, adding that, for example, Germany could potentially ask for a waiver for lithium used in batteries.

"Cobalt is already sitting in this category (along with 850 other products) and is being consumed in batteries in Europe on a daily basis, however, it is true that it could have an impact lead by additional costs in controlling, processing, packaging and storage," he said.

A lithium producer source said the classification would just be a first step, with many possible outcomes in terms of risk management measures.

"This would create business uncertainty regarding which markets could be served, for which applications, and also on which industrial processes and plant requirements would apply, deterring investors from committing to Europe at a crucial time for the entire lithium value chain," the lithium producer said, adding that investors could find other markets more attractive.

"A domestic battery supply chain is one of the EU's key strategic goals and this potential reclassification adds a lot of long-term financial uncertainty to the massive investments which are needed to achieve a domestic battery supply chain," Chavasse said.

Drive up costs

While the classification would not stop lithium usage, Rystad Energy said in a statement, it would likely have an impact on at least four stages in the EU lithium battery supply chain, namely mining, processing, cathode production and recycling, and administrative issues, risk management and restrictions could hit each of these fledgling industries in Europe, driving up costs.

Neither lithium mining, refining, cathode making or recycling would be encouraged by the reclassification, while decisions about the latter three were more likely to be impacted as their location had greater geographical flexibility than unmovable mines, Chavasse said.

The lithium producer believed the stigmatization of lithium as a hazardous substance could also reduce public support for new mines.

"The impact on refining projects would be very negative, but it would again depend on which risk management measures will be developed," he said.

"However, investment decisions are taken now, therefore not knowing which measures will have to be implemented is clearly a refraining factor," he said. "Lithium carbonate and hydroxide could be processed outside of the EU and then imported."

The move was against the aim of developing a domestic battery supply chain and could perhaps push refining back to China, the lithium producer said, adding that it would also make EU battery makers' strategic autonomy more difficult to achieve, creating serious problems of security of supply.

"It is hard to know how this will play out as there are many variables, but I think it is unlikely to make [battery makers] supply chains more local or reduce their costs," Chavasse said.