Understanding lithium demand, page-282

Chile is throwing away "C-bit" of global lithium resources
2019-06-04
Source: High- tech lithium grid

Guide] Chile has the world's largest lithium reserves, but in recent years, the country's output has barely changed. At the same time, the Chilean government has been slow to allow new companies to enter the market. Chile is losing to its competitors.
China's Powder Network News Chile seems to be in a good position as automakers compete to build a clean energy future.



This South American country has the world's largest lithium reserves, and lithium is a lightweight metal that is critical to the manufacture of electric vehicle batteries. Chile has high quality lithium and low production costs.



But in recent years, the country’s output has barely changed. The only two producers in Chile, SQM and Albemarle, have struggled to increase production to take advantage of strong global demand. It is widely expected that global demand will triple by 2025.



At the same time, the Chilean government has been slow to allow new companies to enter the market. Local people and activists are opposed to these new projects due to environmental concerns.



The result: Chile is losing to its competitors.



In 2017, Australia surpassed Chile to become the world's largest lithium supplier. Argentina, a neighboring country, is expected to benefit quickly, with at least a dozen projects under preparation.



Analysts said that although Chile is still an important producer, the market is still uneasy and investors are turning to other countries to boost supply.



Chile’s current performance is “disappointing”, and if Chile’s expansion projects continue to frustrate, it could lead to “uncertainty and complexity in the supply chain,” said Joe Lowry, an independent lithium industry consultant based in the United States.



The Chilean Ministry of Mines did not respond to multiple requests for comment from reporters. Mining Minister Baldo Prokurica told reporters earlier this year that the government is doing everything possible to "ensure that lithium and other battery metals are mined."



On May 23, SQM, headquartered in San Diego, announced that it would postpone its expansion plan at Atacama Salt Flats in Chile until the end of 2021, and the company's share price plummeted more than 6%. The project will enable the company to produce up to 120,000 tons of lithium carbonate, which is more than twice the current production.



The company's chief financial officer, Gerardo Illanes, told Reuters in an e-mail that although the project was postponed, it would provide the company with "the flexibility needed in a fast-growing market such as lithium."



Its competitor, the world's largest lithium producer, Yahoo said earlier this month that production in 2019 will be roughly the same as last year. Eric Norris, president of Albemarle Lithium Metals, said the Charlotte, North Carolina-based company is advancing Atacama's expansion project and said "we are very strong, active and active with Chilean regulators. relationship."



About 1150 km north of Santiago, SQM and Albemarle operate at Atacama, where rows of huge rectangular reservoirs are baked in the hot sun, filled with metal-rich brine. Lithium in Chile was found in underground salty reservoirs. The miners only need to pump this precious liquid to the surface.



The region's strong sunlight, low humidity and stable hot air evaporate most of the water, leaving behind the "white gold" mud. Chile is located in the Pacific Ocean, so exports are easy.



According to data from the US Geological Survey, these advantages make Chile account for about 20% of global lithium production. This ratio is lower than the 36% level four years ago.



"They say 'We still don't understand the rules of the game,'" Awad said.



Part of this erosion stems from the laws passed by the dictator Augusto Pinochet decades ago.



His government announced that lithium is a "strategic" resource because lithium is used for nuclear fission. Chile requires private miners to either work with the government, as SQM and Albemarle do, or obtain a special license called CEOL to mine their own lithium.



Some miners say the problem is that the government has not yet provided guidelines for accessing CEOL. It also did not announce a unified mine usage fee or tax plan to help investors assess risk.



Canada’s Fortune Mining Co., Ltd.’s Chilean executive Awad said that this uncertainty has caused many foreign investors to panic.



"They said, 'We still don't understand the rules of the game,'" Awad said.



Since the soaring lithium price in 2014, no new producers have received the licenses required for production. Awad said that Wealth Minerals, which has obtained concessions at Atacama and other Chilean salt flats, has chosen to work with Chile's state-owned mining company Enami, which is the company's final effort to advance the plan.



environmental issue



Another major challenge is water. In order to maintain the feasibility of mining, Chile's underground lithium reserves must be supplemented by snow and rainfall in the Andes. 80% of Chile's lithium reserves are hidden under the Atacama salt flats, and no one can determine how much lithium can be safely mined.



A government study last year found that leaving the system with more water and salt water than the return system prompted the government to announce new restrictions. This led to a more rigorous inspection of the water consumption of SQM and Albemarle.



After Chilean regulators questioned the use of its water-saving technology and objected to its environmental research, Albemarle recently abandoned plans to expand lithium carbonate from 80,000 tons to 145,000 tons.



The company said the decision was made because the market demand for its top Chilean product, lithium carbonate, fell, while the company's demand for lithium hydroxide produced elsewhere declined.



SQM also disputed with regulators on suspicion of taking too much water from the salt flats. The dispute ended with SQM agreeing to a compliance program that required the world's second-largest lithium miner to reduce mining and strengthen censorship of its operations.



In addition, the Chilean DGA Water Authority acknowledged that it did not know whether lithium mining would affect freshwater reservoirs under the Atacama Salt Flats, which provide drinking water to local communities.



Government officials told Reuters that for technical reasons, a national water research study originally scheduled to be completed last year was postponed until the end of 2019.



Uncertainty reinforces the determination of the local community, whose adobe houses are dotted in volcanic hills around Atacama.



Sergio Cubillos, chairman of the Atacama Aboriginal Committee representing 18 communities, told Reuters that the committee would take action to block any new mines on the salt flats due to a lack of understanding of the impact of the new mine.



Such resistance may have caused at least one potential lithium project to fail.



Earlier this year, Canada-based LiCo Energy Metals cancelled the Purickuta project in Atacama on the grounds of strong opposition from the local community.



In general, the setbacks in Chile may require battery manufacturers and the electric vehicle industry to develop backup plans, said Howard Klein, a lithium-based RK Equity partner and lithium analyst.



“The best salt water in the world is in Chile. But production should be stagnant when it should grow. “If it’s not from Chile, it must come from more costly or riskier regions, from an economic perspective, these regions Not very ideal. ”