- Chile plans to set up a state-owned lithium company
- State company controls world’s largest lithium reserves
- Copper giant Codelco plays key role
SANTIAGO, April 20 (Portal) – Chile’s President Gabriel Boric said Thursday he would nationalize the country’s lithium industry, the world’s second-largest producer of the metal essential to electric vehicle batteries, to boost its economy and protect its environment.
The shock to the country with the world’s largest lithium reserves would over time transfer control of Chile’s massive lithium operations from industrial giants SQM (SQMA.SN) and Albemarle (ALB.N) to a separate state company.
This presents a new challenge for electric vehicle (EV) manufacturers struggling to secure battery materials as more countries seek to protect their natural resources. Mexico nationalized its lithium deposits last year, and Indonesia banned the export of nickel ore, a key battery material, in 2020.
“This is the best chance we have for the transition to a sustainable and developed economy. We cannot afford to waste them,” Boric said in a nationally televised address.
Future lithium contracts would only be awarded as government-controlled public-private partnerships, he said.
The government will not terminate the current contracts but hopes the companies are open to state involvement before they expire, he said, without naming Albemarle and SQM, the world’s top lithium producers.
SQM’s contract expires in 2030 and Albemarle’s in 2043.
SQM, officially called Sociedad Quimica Y Minera de Chile, and Albemarle supply Tesla Inc (TSLA.O), LG Energy Solution Ltd (373220.KS) and other electric vehicle and battery manufacturers.
Albemarle said the announcement will have “no material impact on our business” and will continue discussions about investing in further growth and deploying new technologies in Chile.
SQM was not immediately available for comment.
South Korean battery maker SK On, which has a long-term supply deal with SQM, said it will monitor developments and respond with a long-term perspective.
Chile’s announcement failed to trigger a turnaround in lithium prices, which have plunged more than 70% from a November peak on weaker demand for electric vehicles in China, the world’s largest auto market.
The most-traded lithium carbonate futures on China’s Wuxi Stainless Steel Exchange fell 3.4% at 0618 GMT on Friday.
[1/2] A view of a brine pool of a lithium mine on the Atacama Salt Flats in the Atacama Desert, Chile August 16, 2018. Portal/Ivan Alvarado/File Photo
Portal graphics
“If or if battery makers extend their contracts with lithium companies in Chile, contract terms are likely to become more difficult than they have been in the past when there was no government involvement,” said Cho Hyunryul, an analyst at Samsung Securities.
The move is likely to shift future investments in lithium to other countries, including Australia, the world’s largest producer, according to analysts.
“Political stability is very important for any mining project… Mining-friendly jurisdictions like Australia would be places to invest additional funds,” said Harsh Bardia, an analyst at JBWere, the private wealth arm of National Australia Bank.
Top Lithium Producers
CODELCO ROLL
Boric said state-owned Codelco, the world’s largest copper producer, will be tasked with finding the best path for a state-owned lithium company and will seek congressional approval for the plan in the second half of the year.
Congress reviewed many of Boric’s more ambitious proposals and shelved a proposed tax reform bill in early March.
Codelco and state-owned mining company Enami will be awarded exploration and extraction contracts in areas where private projects now exist, prior to the formation of the national lithium company.
A department will be dedicated to advancing the technology to minimize environmental impact, including the preference for direct lithium extraction over flash ponds.
Privately held Summit Nanotech Corp, which is developing direct lithium extraction technology, welcomed the announcement.
Boric said the country will seek to protect biodiversity and share the benefits of mining with indigenous and surrounding communities.
“Today we are unveiling a national lithium strategy that is technically sound and ambitious,” the president said, adding it would “build a Chile that more equitably distributes the wealth we all generate.”
Country with the highest lithium reserves
Reporting by Alexander Villegas and Ernest Schneyder; Editing by Jacqueline Wong
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