Chile unveils plans to nationalise vast lithium industry
Santiago| Chile’s President **riel Boric said on Thursday (Friday AEST) he would nationalise the country’s lithium industry, the world’s second-largest producer of the metal essential in electric vehicle batteries, to boost its economy and protect its environment.
The long-awaited move in the country with the world’s largest lithium reserves would in time transfer control of Chile’s vast lithium operations fromindustry giants SQM and Albemarleto a separate state-owned company.
Evaporation ponds in the Atacama Desert, Chile. The sun evaporates the water, leaving lithium chloride. .
It poses a fresh challenge to EV manufacturers scrambling to secure battery materials, as more countries look to protect their natural resources. Mexico nationalised its lithium deposits last year and Indonesia banned exports of nickel ore, a key battery material, in 2020.
“This is an opportunity for economic growth that will be difficult to beat in the short term,”Mr Boric saidin an address televised nationwide.
Future lithium contracts would only be issued as public-private partnerships with state control, he said.
“This is the best chance we have at transitioning to a sustainable and developed economy. We can’t afford to waste it.”
The left-leaning government would not terminate current contracts, but hoped companies would be open to state participation before they expire, he said, without naming Albemarle and SQM, the world’s top two lithium producers. SQM’s contract is set to expire in 2030 and Albemarle’s in 2043.
SQM and Albemarle supply Tesla, LG Energy Solution and other EV and battery manufacturers. Albemarle said the announcement would have “no material impact on our business” and said it would continue talks on investing in further growth and using new technologies in Chile.
South Korean battery maker SK On, which has a long-term supply contract with SQM, said it would monitor the development and respond with a long- term view.
The announcement by Chile did not trigger a reversal in lithium prices, which have plunged more than 70 per cent since November due to weakening EV demand in China, the world’s biggest auto-market.
“When or if battery makers renew their contracts with lithium firms in Chile, contract conditions would likely become more difficult than what they saw in the past when there was no state involvement,” said Cho Hyunryul, an analyst at Samsung Securities.
The move is likely to spur a shift in future investment in lithium to other countries including Australia, the world’s biggest producer, analysts said.
“Policy stability is very important for any mining project ... Mining-friendly jurisdictions like Australia would be places where incremental funds get invested,” said Harsh Bardia, an analyst at National Australia Bank’s private wealth arm JBWere.
The Boric government plans to set up a lithium institute and is promoting downstream investments to capture more of the EV boom rather than just sending semi-processed material to Chinese and Korean plants. This week, China’s BYD was granted access to preferential prices to make battery-grade lithium carbonate at a plant scheduled to begin operations by end-2025.
As a free-trade partner with the US, Chile stands to benefit from President Joe Biden’s green stimulus program. Still, China is Chile’s biggest trading partner based on raw material exports. Chile has been losing market share to countries such as Argentina where more investor friendly rules have spurred a boom.
Codelco role
Mr Boric said he would start a dialogue with communities, companies and lawmakers to create a lithium company owned completely by the state and would seek approval of the plan from Congress in the second half of the year.
Congress has been a check on many of Mr Boric’s more ambitious proposals and shelved a proposed tax reform bill in early March.
State-owned Codelco, the world’s largest copper producer, will be tasked to find the best way forward for government participation in extracting lithium.
“If a public-private company is created to exploit lithium in the Atacama salt flats, it will be controlled by the state through Codelco,” Mr Boric said.
Codelco and state miner Enami will be given exploration and extraction contracts in areas where there are now private projects before the national lithium company is formed.
There will be a division dedicated to advancing technology to minimise environmental impacts, including favouring direct lithium extraction over evaporation ponds which are used currently.
Privately held Summit Nanotech, which is developing direct lithium extraction technology, welcomed the announcement.
Mr Boric said the country would look to protect biodiversity and share mining benefits with indigenous and surrounding communities.
“Today we present a national lithium strategy that’s technically solid and ambitious,” the president said, adding it would build “a Chile that distributes wealth we all generate in a more just way”.
