Clara Denina & Pratima De Sai

LONDON, (Reuters) – Top lithium producer Albemarle (NYSE:) Corp could have to close its German plant at Langelsheim if the European Union declares the metal that is used in electric vehicles a dangerous material, according to its finance chief.

Because lithium plays a pivotal part in electric cars, it is an important commodity for meeting international targets to reduce carbon emissions. In 2020 the EU added it to its list of essential raw materials.

The European Commission is currently reviewing a proposal made by ECHA to make lithium carbonate, hydroxide, and chloride dangerous for human safety.

This would lead to a stricter regulatory environment for the use of them at a moment when Europe is striving to become self-sufficient in electric car batteries by 2025.

While the proposed legislation doesn’t prohibit lithium imports it will increase costs to processors if they are legislated.

Scott Tozier, chief financial officer, said in an email statement that Albemarle was no longer able to import lithium chloride as its primary feedstock. The entire facility (Langelsheim), would be in danger of closing.

Tozier stated, “With Albemarle having approximately $500million in annual sales, any potential closing would have a significant economic impact on Albemarle.”

Officials from the European Commission confirmed that they were evaluating the proposal but did not offer any further comments.

The EU members are currently providing their opinions on the proposal to a Committee which meets July 5-6 for discussion on chemicals, including lithium, that have been classified as hazardous. The final decision will be made by the committee at either the beginning or end of 2022.

Over the last two years, Europe and the United States have intensified their efforts to create secure supply chains that are independent of China to reduce dependence on China for important minerals in solar cells, wind turbines, and electric cars.

Tozier claimed that classifications would hinder the location of EU-based battery supply chains and move the process to non-EU areas, thus creating the necessity to import.

Future cathode and battery manufacturing will be outside the EU. Albemarle wouldn’t be able convert materials locally and all EU lithium raw materials will need to be imported to make cathodes.

Langelsheim has been producing lithium since 1921. It employs over 600 people, and is expected to account for 8.8% of the 2022 Net Sales projections by Albemarle.

The European Commission estimates that Europe could need to use up to 18% more lithium by 2030, compared with 2020 and as high as 60% by 2050.

A source in the industry said that classifying lithium hazardous could place extra restrictions on how lithium chemical for batteries is produced, used, recycled and stored in Europe.