Shortly after the Anglo-American miner pushed back the timeline of its Jadar lithium project by another year (to 2027) last week, citing a slower than anticipated environmental permitting process, Serbia’s government announced it had revoked the miner’s exploration license for the site.
The government pulled the plug on the project after succumbing to months of protests by environmentalists and communities in the Jadar valley, where the site would have been located. The decision comes ahead of elections in April, which suggests the government did not want to risk Jadar becoming a political liability.
Rio Tinto said it was seeking legal advice on the decision.
While the immediate impact of the Jadar impasse on market sentiment and prices was limited (the site is at a very early stage of development and would not reach first production for several years), the incident highlights ongoing headwinds that Europe as a whole faces while it seeks to establish a domestic battery industry that will fuel the electrification of its transport sector and help achieve the bloc’s emissions targets.
Lithium is a key ingredient in lithium-ion batteries that power electric vehicles (EVs), demand for which has been soaring over the past year.
Lithium prices have surged over the past year from the multi-year lows of 2020, with the commodity entering a new bullish cycle supported by high demand for batteries. This has supported a price uptrend across the lithium complex, including the technical and industrial grades.
Fastmarkets’ price assessment for lithium carbonate 99% Li2CO3 min, technical and industrial grade, spot price ddp Europe and United States was at $40-43 per kg on Thursday January 20, up by 13.70% from $35-38 per kg the previous week and more than five times the $7-8 per kg recorded on January 21, 2021.
Europe is trying to build a credible, viable, economically sound battery supply chain, and by extension battery raw materials, to sustain its automotive companies’ need for reliable supply and further the bloc’s energy transition targets.
This is not only aimed at battery capacity but also includes upstream materials, cathode and anode. Better still would be if the European battery sector could rely on local mining of raw materials. Localization of supply, or drawing key components of the supply chain closer to home, is a crucial part of reducing European companies’ dependence on Asia and other foreign players.
Serbia’s Jadar lithium project might have offered that, even if the operation was still several years away.
“Producers as a whole will struggle to keep up with demand for lithium, so any major setback like this will be of major concern to users. There are likely to be other similar setbacks at other projects; while protests are not uncommon, if too many projects either get significantly delayed or abandoned then it increases the risk of meaningful shortages,” according to William Adams, head of battery raw materials research at Fastmarkets.
The Jadar operation being written off could have “far-reaching, longer-term implications” for future lithium supply in Europe, he noted.
Other jurisdictions have seen similar setbacks for developers of new lithium mines.
In Portugal, the latest set of mining rules introduced last year gives local authorities more power over permitting new projects in the country, which could lead to the delay and cancellation of prospective operations.
The change in law followed prolonged demonstrations by communities, especially in the north of Portugal, where a developer was looking to establish a lithium petalite operation.
Another project in the center of the country – Mina do Barroso, run by Australia-listed Savannah Resources – is targeting a definitive feasibility study in 2022.
But with general elections due in Portugal later this week, Europe should take heed, since the Serbia case has shown how quickly the tide can turn against new lithium operations, even if Europe’s energy transition depends on them.
