States support lithium mining with subsidies and incentives, yet China still dominates the market
Lithium has been mentioned with increasing frequency in recent years. The European Union classifies it as a critical raw material, without which the goal of net-zero emissions by 2050 cannot be achieved. Yet Europe plays only a figurative "second fiddle" across the entire sector. Europe significantly lags behind China, which now controls most of the global lithium supply chain. It is therefore worth asking what Europe can do to at least mitigate this unfavourable situation. This raises the question of how Europe can kick-start its own lithium supply chain, including mining. Current developments show that public financial support for lithium mining projects is far from unusual.
China currently produces more than three-quarters of all lithium-ion batteries worldwide, according to the International Energy Agency (IEA). The country is also home to six of the ten largest battery producers. The situation is similar in mining: in 2024, China ranked third behind Australia and Chile, with annual production of approximately 40,000 tonnes, and is expected to rise to first place as early as next year. Australia is cutting output due to the global decline in prices.
Although forecasts suggest that a large share of Chinese producers will remain loss-making in the short term, the sector is being driven forward by a combination of efforts to retain market share, preserve jobs and, above all, robust state support. This has enabled China to strengthen its control over raw-material resources over the long term, even when projects are not economically viable in the short run. According to an AidData analysis, Chinese state-backed banks and other institutions invested approximately $57 billion (in loans, grants and guarantees) in projects mining so-called transition minerals, including lithium, between 2000 and 2021.
How is Europe faring?
Europe long relied on the market and imports, resulting in its current 0.1% share of global lithium production. However, pressure to ensure energy security and the adoption of the Critical Raw Materials Act are gradually opening the way for state funding of projects intended to reduce the substantial gap with China and the United States.
The neighbouring country of Germany provides the first example. Although mining there is still at an early stage, the recent discovery of a deposit with estimated lithium reserves of 43 million tonnes in Altmark, Saxony-Anhalt, offers a promising sign for the future. Germany is not limiting itself to geological exploration, however, as it is already actively supporting the development of the entire value chain. The most visible example is Vulcan Energy's project, which received €104 million in state grants from the federal government and the states of Rhineland-Palatinate and Hesse. The aim is to build Germany's first integrated "clean" lithium production chain and reduce the automotive industry's dependence on imports. From 2026, Vulcan is expected to supply up to 24,000 tonnes of lithium hydroxide annually, enough to manufacture batteries for roughly half a million electric vehicles. The €690 million project includes mining in Rhineland-Palatinate and subsequent conversion at a plant near Frankfurt.
Another indication of this shift is the Rock Tech Lithium project in Brandenburg. The state's economy ministry has issued a binding memorandum to provide up to €90 million for the construction of a lithium converter in Guben, the first facility of its kind in Europe. Support is not limited to production either. Germany's rail authority has pledged up to a further €10 million for the rail infrastructure required by the project. Rock Tech is thus becoming one of the first recipients of public funds directly supporting the creation of missing links in Europe's lithium supply chain.
Finland also plays a strong role, where the Keliber project demonstrates that state support need not take the form of grants, but can also involve strategic financing. The European Investment Bank has become a key pillar of the loan structure, under which Sibanye Stillwater secured €500 million to complete a mine and processing plant in central Finland. The project had previously received €250 million through an equity increase, while state-owned Finnish Minerals Group also holds a minority stake. From 2026, Keliber is expected to produce around 15,000 tonnes of battery-grade lithium annually for at least sixteen years. This creates a robust model combining private capital, European institutions and state participation.
What about the rest of the world?
While Europe is making up for lost time, the United States, Chile and Australia have for years pursued strategic, comprehensive approaches to strategic raw-material supply chains. They combine direct investment, tax incentives, state guarantees, long-term offtake contracts and regulatory intervention to secure a stable position in the global supply chain. The result is clear: the US and Chile are strengthening domestic processing and related industries, while Australia remains the world's dominant producer of spodumene for now, although it is currently facing the impact of low prices.
One example is the US Thacker Pass project in Nevada, one of the largest potential lithium sources in the country. General Motors has also taken an equity stake in the project, and the US government has made it a precedent in building a domestic battery industry. In October 2024, the Department of Energy (DOE) not only restructured its loan support but also acquired an approximately 5% stake in both Lithium Americas and the project itself. This is a form of direct state intervention that goes far beyond conventional subsidies. The government is becoming a minority investor because lithium is vital to meeting the objectives of the Inflation Reduction Act and reducing dependence on China.
In Latin America, Chile has taken the most forceful approach, unveiling its National Lithium Strategy in 2023. It envisages establishing the state-owned Empresa Nacional del Litio and acquiring majority stakes in all strategic deposits. State giant Codelco, together with agency ENAMI, has been mandated to enter partnerships with investors and manage the development of new deposits. Chile is therefore not relying on grants, but on direct state control over key segments of the value chain to ensure that as much added value as possible remains in the domestic economy.
In Australia, specifically Western Australia, which has long been the world's lithium mining hub, the government has opted for targeted financial support to maintain producer competitiveness during a period of low prices. The Lithium Industry Support Program provides temporary interest-free loans of up to A$50 million, relief on licence, port and mining fees, and other measures to stabilise cash flow. This is an active countercyclical policy aimed at maintaining operations, jobs and export capacity during a period of price volatility, thereby preserving the region's dominant global position.
