One of Europe’s few developers of lithium, a vital metal used to power electric vehicles, has increased production targets in response to growing demand from carmakers such as Volkswagen and Renault.
Vulcan Energy Resources said on Monday it was aiming to extract enough lithium to supply up to 500,000 electric vehicles a year to help carmakers cope as the industry moves from combustion engine to battery power.
Although the start-up is yet to produce any metal, the project’s success is critical to Europe securing the lithium it needs to supply its rapidly growing electric car manufacturing sector.
If net zero targets are to be reached by 2050, electric cars need to make up about 60 per cent of vehicles sold annually by 2030, according to the International Energy Agency.
Lithium prices have also surged about 10 times since the start of 2021 to almost $80,000 per tonne, reflecting supply shortages. Vulcan predicts an average lithium price of $37,000 to 2040.
Vulcan, based in Perth, Australia, with a market capitalisation of $650mn, hopes to extract 24,000 tonnes of lithium hydroxide per year from Germany’s Upper Rhine Valley by 2027 — up 60 per cent from its previous goal of 15,000 tonnes.
It is also aiming to raise €1.5bn for capital expenditure — double previous plans — to expand the extraction of the compound from lithium-rich brine as it prepares to build commercial plants for its still to be proven technology.
Founded in 2018, the group is targeting its first production of lithium by the end of 2025, later than its original 2023 goal.
Francis Wedin, Vulcan’s co-founder and chief executive, told the Financial Times that the start-up’s ambitions had increased because of demand from carmakers.
“Simple answer — strong demand from the automakers,” he said in response to a question on the new production targets.
However, there are some doubts over Vulcan’s technology. “I am indeed sceptical,” said Daniel Jimenez, founding partner of lithium consultancy iLiMarkets. “The real challenge is the lithium extraction and there is too little data to assume they have cracked the code.”
Despite the question marks, carmakers such as Stellantis, which is behind the Peugeot, Opel and Jeep brands, are banking on Vulcan’s success.
Last year, it became the first carmaker to invest in a lithium producer when it paid Vulcan €50mn in return for equity and future supply of the metal.
Stellantis has also joined forces with Vulcan on a clean energy project, with the Australian group developing geothermal wells at the carmaker’s plant in Rüsselsheim, where it produces the Opel Astra.
In addition, Vulcan has secured binding future commitments for lithium purchases from Volkswagen, Renault, battery manufacturer LG Energy Solutions and materials producer Umicore.
Vulcan’s technology involves pumping the lithium up to the surface via geothermal wells in a process that uses renewable energy, reducing its carbon footprint.
Europe will need about 215,000 tonnes of lithium carbonate equivalent (LCE) in 2027 and source about 67,000 tonnes of material domestically and 158,000 tonnes from conversion plants using feedstock from outside the continent, according to Fastmarkets. Vulcan’s new production target is equivalent to about 21,000 tonnes LCE.
Jordan Roberts, battery raw material analyst at Fastmarkets, warned that because of the finely balanced market “if one of the mines or third party converters are delayed, Europe will very much be short of supply”.
