Europe is seeking to build a stronger domestic lithium supply chain, but investors in processing facilities cannot rely on the EU Carbon Border Adjustment Mechanism (CBAM) to shield them from international competition. Lithium in its main raw and refined forms is currently outside CBAM’s scope, so imported products can enter the EU without a corresponding charge. European projects therefore depend on strategic policy support, competitive operating conditions and long-term customer agreements.
Building domestic processing capacity requires major investment in industrial infrastructure, electricity, chemicals and environmental management. Those costs add to the challenge of expanding Europe’s battery industry while imported lithium products remain outside the mechanism.
EU lithium imports remain concentrated among external suppliers
Eurostat data show that EU imports of lithium carbonate fell to approximately 8,200 tonnes in 2025, from around 15,000 tonnes in 2019. Prices have remained volatile since the market boom of 2022–2023, making investment planning more difficult for companies exposed to shifts in lithium demand and prices.
Chile supplied approximately 70% of the value of EU imports of lithium carbonate in 2025, with Argentina and the United States next. The figures point to reliance on a limited group of external suppliers, before accounting for the additional lithium needed for battery-cell manufacturing.
For policymakers, securing access to lithium is only one part of the task. The ability to convert raw materials into battery-grade chemicals is also central to developing a more resilient domestic battery industry.
Battery-grade conversion is central to domestic capacity
Lithium from hard-rock deposits or brines must be processed into battery-grade lithium carbonate or lithium hydroxide. The conversion processes require strict impurity control and can consume significant amounts of energy and chemicals.
Under the EU Critical Raw Materials Act (CRMA), Europe aims to expand domestic processing and strengthen its position beyond raw-material sourcing. Imported lithium chemicals are not currently subject to the CBAM framework that applies to covered products such as steel and aluminium. European converters must therefore compete through operational efficiency and commercial advantages rather than carbon-border protection.
Project competitiveness will depend on reliable feedstock, renewable electricity, water management, product quality and proximity to customers. Dependable supplies are particularly important because conversion facilities need suitable raw materials in sufficient volumes to operate efficiently.
Customer agreements and operating conditions shape project financing
For investors and lenders, securing customers can be as important as obtaining lithium feedstock. Long-term offtake agreements with cathode producers and battery manufacturers can improve revenue visibility and strengthen the financing case for processing facilities.
A project’s bankability will depend on its ability to supply the required product quality at competitive cost, maintain reliable supply and meet customer specifications. Logistics and proximity to downstream manufacturing can also affect its commercial position.
Renewable electricity and traceability may help European producers demonstrate environmental advantages. Lower-carbon production creates lasting commercial value only if customers recognise and reward it, through procurement requirements, contractual commitments or other market mechanisms.
Any future CBAM coverage would need to account for production routes
Extending CBAM to lithium products is possible in principle, but an effective system would be technically challenging to design. Lithium from brines and hard-rock deposits can have different environmental footprints, depending on extraction methods, processing technology, energy sources and other operating conditions.
Recycling is also expected to become a more important source of lithium feedstock over time. Any future carbon-accounting framework would need to account for these different production routes and avoid incentives that undermine Europe’s access to lower-carbon imported materials. Policy design would need to balance carbon-cost considerations with supply security and the development of competitive European processing capacity.
European processing investment depends on commercial viability
The immediate investment challenge is to assess European lithium processing projects as strategic industrial infrastructure, rather than on the assumption that CBAM will protect them from imports.
Project prospects will depend on secure feedstock, efficient operations, reliable energy supplies and long-term agreements with battery-sector customers. Public support under Europe’s critical raw materials strategy may help establish capacity, but commercial viability will remain essential. Domestic converters will need to turn lower-carbon production, traceability and supply-chain reliability into tangible value for customers if Europe is to achieve a durable industrial advantage.