Lithium Economics

Can South America Capitalize on Its Lithium Reserves?

Feb 27, 2019

A few days ago, three well-known lithium experts, William Tahil (Meridian International Research, France), Juan Carlos Zuleta (Lithium Economics Analyst, Bolivia) and David Merriman (Roskill, UK) were invited by the Latin America Advisor to answer a comprehensive question on the future of lithium in South America. I hereby transcribe the report in its entirety with the corresponding permission of the Inter-American Dialogue.

Bolivia’s Salar de Uyuni salt flat contains exceptionally rich deposits of lithium, a metal that could become increasingly valuable if substitutes are not found to produce advanced batteries.

Question: Bolivia announced a major lithium deal on Feb. 6, picking China’s Xinjiang TBEA group to take a 49 percent stake in a $2.3 billion lithium project with YLB, the state lithium company. Meanwhile, a delegation from a consortium of Indian state-owned companies recently visited South America’s “lithium triangle” spanning Chile, Argentina and Bolivia to explore opportunities in exploiting the resource, which is expected to be in increasingly high demand for uses such as electric vehicle batteries. Lithium investment was also reportedly on the agenda when Argentine President Mauricio Macri visited India this month. How well are the South American countries engaging international investors in their lithium development strategies? Are there ways the three nations could collaborate on the metal’s development as opposed to competing? Which global players are best positioned to gain the upper hand in exploiting South America’s lithium deposits?

Answer: William Tahil, research director at Meridian International Research: “China’s rise to dominance of the entire lithium battery supply chain has been unrelenting. The list of takeovers and investments is unending. Everywhere there’s lithium, there’s China. China’s ambassador to Bolivia said at the signing of the TBEA agreement that China will need 800,000 metric tons of lithium (carbonate) per year by 2025 for its car industry—roughly four times current global production. CATL and BYD are now the number two and three battery manufacturers in the world, and they’re expanding continuously. Following the TBEA announcement, Tianqi recently finalized a 25 percent stake in SQM for $4.1 billion. This gives China access to the highest-quality deposit in the world, Salar de Atacama. Ganfeng went from zero in 2014 to 25 percent global market share for battery grade lithium hydroxide and nearly 20 percent of the lithium carbonate. How can other countries such as India possibly catch up against the strategic onslaught of China Inc.? For China, lithium is but one small tranche of the global ‘Belt and Road’ program. In terms of collaboration between Argentina, Chile and Bolivia, a de facto lithium ‘OPEC’ may well be foreseeable— all in Chinese hands—as OLEC, or the Organization of Lithium Exports to China. Half of the worldwide investment in electric vehicles by the automotive industry is for China alone. If the rest of the world wants to have access to significant numbers of electric vehicles at all in 2030, alternatives to lithium need to be prioritized.”

Answer: Juan Carlos Zuleta, Bolivia-based lithium economics analyst: “There is another key actor in the Bolivian lithium spectrum today: Germany’s ACI Systems. This relatively fresh company is expected to produce up to 40,000 tons of lithium hydroxide from residual brine at Salar de Uyuni between 2021-22. I have my reservations as to its real capacity, both technical and fi nancial, to undertake this task. As disadvantageous as it might be to Bolivia, the new mixed company YLB-ACI Systems has received the government’s blessing. Although it’s too early to conclude whether the joint venture will be capable of fulfilling its promises, it is undoubtedly Bolivia’s first serious attempt to incorporate itself into the booming lithium market. The pre-agreement signed with Xinjiang TBEA Group has the same global investment as with ACI Systems, albeit this time the center of operation would be two smaller salt pans with much less lithium content than Salar de Uyuni. It seems that India is a bit late to accomplish anything significant in Bolivia and Argentina. There doesn’t seem to be much lithium left there for late-comers. Hence Chile appears the best option available for India, despite all the legal hurdles that still constitute major obstacles to lithium development there. Argentina is following an open-market strategy, where its government has little say, and foreign companies are basically defining the major courses of action. The involvement of Bolivia’s government seems to be a formation of mixed companies with foreign investors, although not necessarily for valid reasons or the benefi t of the country. Chile has managed to negotiate onerous royalties with Albemarle and SQM, taking advantage of its relatively richer lithium resources. I would suggest the countries concentrate efforts in development and implementation of new technologies to extract lithium from brine, going beyond use of solar evaporation ponds focusing in rapid evaporation, desalinization and advanced chemical methods. Both Albemarle and SQM in Chile remain the best-positioned global players in South America, though we should be vigilant as to what South Korea’s Posco can accomplish in the following years in Argentina, with its revolutionary chemical technique to extract lithium from brine with no use of traditional solar evaporation ponds.”

Answer: David Merriman, manager of battery & electric vehicles materials at Roskill Information Services: “South American countries, principally Chile, Argentina and Bolivia, have had varying success in attracting international investment. The enforcement of lithium production licenses in Chile, previously the largest producer of lithium in the world, and increasing involvement of Chilean state-owned company Corfo has restricted the development of new projects in the country and dissuaded international investors. Alternatively, Argentina has attracted significant investment in lithium projects from the international community, with Japanese, Korean, French and Canadian companies developing lithium projects in the Argentine Puna. The recent investment in Bolivia by China’s Xinjiang TBEA group is not the first international involvement the Bolivian government has sought to develop lithium brine deposits in the country. Bolivia signed a preliminary agreement with Posco and Kores in 2012 to develop the Salar de Uyuni and construct lithium-ion battery components in the country. Later agreements with China-based Linyi Gelon New Battery Materials and CITIC Group have also attempted to develop lithium resources in Bolivia with limited success. The varied nature of the lithium brine deposits within a country, let alone throughout the ‘lithium triangle’ encompassing Chile, Argentina and Bolivia, make it difficult for collaboration between the countries. Other factors, including the disparity in the current market position of the three countries, governmental differences, existing foreign investments and increasingly nationalistic sentiments regarding battery raw materials would also be barriers to cooperation. The development of methods to process high Mg:Li brine deposits in Western China could potentially be translated into greater success for Xinjiang TBEA group when processing brines at the Salar de Uyuni, Salar de Coipasa and Pastos Grandes salt pans. It is unclear, however, if Xinjiang TBEA Group will have access to this technical knowledge. Though Bolivia holds very large resources of lithium in brine deposits, difficulties with brine chemistry, local infrastructure, climate and government involvement are expected to remain significant barriers to entry for large-scale lithium production in the country.”

Note.- This article was first published by the Latin America Advisor on Wednesday, February, 27, 2019 (See: https://www.thedialogue.org/wp-content/uploads/2019/02/LAA190227.pdf).

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