Bloomberg — Chile’s government delivered its long-awaited lithium development policy in which the state will partner with companies in projects to tap more of the world’s biggest reserves of the battery metal. Producer shares slumped.
President Gabriel Boric announced the new model in a national television address late Thursday, saying the state would hold a majority stake in joint ventures. Initially, state copper giant Codelco will sign up partners for new contracts, before handing over the role to a dedicated state national lithium company at a later date.
The left-leaning administration is seeking a bigger role for the state in a metal that’s critical to the clean-energy transition. At the same time, authorities want to attract more private capital, defend the environment and move further down the value chain.
“Chile has some of the biggest reserves in the world,” Boric said. “This is one of our best opportunities to move towards a sustainable and developed economy.”
It’s a big ask and an important balance to strike for the Chilean economy, the global lithium market and the transition away from fossil fuels. The Latin American nation is the second-biggest supplier of the key ingredient in electric-vehicle batteries.
Losing Share
Chile has been losing market share to countries such as Argentina where more investor-friendly rules have spurred a boom. Chilean output is currently restricted to two companies — SQM and Albemarle Corp. — from a single salt flat. Their contracts — which the government has said will be respected — expire in 2030 and 2043, respectively.
Codelco will be in charge of negotiating with SQM and Albemarle a stake for the state in their Atacama salt flat operations before their licenses expire.
SQM and Albemarle shares were down 7% and 4%, respectively, before the start of regular trading in New York on Friday.
The 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 Co. was granted access to preferential prices to make battery-grade lithium carbonate at a plant that would begin operating 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.
With Chilean lithium currently produced in the world’s driest desert, the government has said it plans to require all new projects to employ a production technique that’s barely used commercially in a bid to reduce water losses.
Turning from the current solar evaporation method to direct lithium extraction would speed up output and avoid vaporizing billions of liters of salty water. But DLE is relatively untested at scale and initially may mean less output and profit.
Contracts awarded to private companies at the end of the previous government’s term were rescinded last year amid growing resource nationalism and a push to introduce greener techniques.
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