Chile plans to nationalise its vast lithium industry
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Chile plans to nationalise its vast lithium industry

May 13, 2023

EURACTIV.com with Reuters

21-04-2023 (updated: 26-05-2023 )

News Service Produced externally by an organization we trust to adhere to journalistic standards.

File photo. Protestors defend lithium as a 'strategic' natural resource in Santiago, Chile, 29 January 2018. [EPA-EFE/MARIO RUIZ]

Languages: Slovak

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Chile's President Gabriel Boric said on Thursday (20 April) 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 shock move in the country with the world's largest lithium reserves would in time transfer control of Chile's vast lithium operations from industry giants SQM and Albemarle to a separate state-owned company.

It poses a fresh challenge to electric vehicle (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," said Boric, a leftist who won the elections in December 2021 with plans to overhaul Chile's market-orientated economic model, in an address televised nationwide.

Chilean leftist Gabriel Boric won the country's presidential runoff election on Sunday (19 December), capping a major revival for the country's progressive left that has been on the rise since widespread protests roiled the Andean country two years ago.

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 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 No.1 and No.2 lithium producers respectively. SQM's contract is set to expire in 2030 and Albermarle's in 2043.

SQM, formally called Sociedad Quimica Y Minera de Chile, and Albemarle supply Tesla Inc, LG Energy Solution Ltd 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.

SQM was not immediately available for comment.

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% since November due to weakening EV demand in China, the world's biggest auto market.

The most-traded lithium carbonate futures on the Wuxi Stainless Steel Exchange in China fell 6.2% as of 0313 GMT on Friday.

"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.

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 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," 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 favoring direct lithium extraction over evaporation ponds.

Privately held Summit Nanotech Corp, which is developing direct lithium extraction technology, welcomed the announcement.

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".

Languages: Slovak

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Chile's President Gabriel Boric said on Thursday (20 April) 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.