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Chile - Lithium Production

Smartphones, tablets and laptops all rely on lithium, a silver-white alkali metal, to store energy. This petróleo branco (“white oil”) comes from surface mines or brine ponds, found in places like Australia, China and the United States. One of the leading sources for this increasingly valuable resource is the South American nation of Chile. Chile planned to nationalize its vast lithium industry, a move by the world's second-largest producer of the material that's essential for the new-energy vehicle (NEV) sector. Creation of the new state company would require the approval from Congress of Chile. Mexico nationalized its lithium deposits last year. Argentina, Bolivia, Chile and Brazil may set up an OPEC-like organization for the mineral, according to media reports.

Chile's President Gabriel Boric announced the plan in a national broadcast 21 April 2023. President Boric campaigned on the platform and had been expected to release a plan for creating a state-run lithium company. Boric said that private companies would have to work with the government in exploiting lithium, and the state would take a controlling interest in each partnership. Boric said that existing contracts would be honored, while expressing optimism "they could find a way to boost state participation in their operations before they expire."

Industry insiders said the plan would have a negative impact on the prices and volumes of lithium imports to China, currently the world's largest producer and consumer of NEVs. The plan could face pushback from interest groups that back Chilean lithium firms. But it was highly likely that the plan would proceed and affect global lithium supplies and also reduce interest in the private sector for local lithium mining.

Chile is the top copper producer in the world with 28 percent of global copper production and the world’s second-largest producer of lithium with a 22 percent share of world production. More than half (55%) of global lithium production originated in Australia. Other principal suppliers include Chile, China (10%) and Argentina (8%). In 2020, Chile's sector produced 5.73 million tons of copper and 70 thousand tons of Lithium Carbonate Equivalent (LCE) in 2019. The mining sector contributed $317 billion or 15 percent of Chile’s GDP in 2021 and mining exports were over 62 percent of the country’s total exports, a figure not seen since 2010.

Chile currently holds over 50 percent of the world’s lithium reserves. This, combined with the demand coming from the electric vehicle industry, will make this resource the focus of international investors and developers. There are two large companies active in the industry: Soquimich S.A. (SQM), in association with Tianqui who owns 24 percent of SQM, and Albemarle Chile Ltda.

Global demand for lithium has ballooned in recent years and is forecast to continue surging in the coming decade because the metal is used in the rechargeable batteries used to power electric vehicles. Makers of laptops, cell phones, and other products with rechargeable batteries also rely heavily on lithium. Lithium is also used in ceramics, certain types of glass, industrial grease, and some types of medication.

Exploding white dwarf stars are thought to be the ultimate source of much of our solar system’s lithium. But on Earth, there are certain environments where the soft, light, silvery-white metal is most concentrated and easily mined—notably in briny groundwater aquifers found beneath desert salt flats. An ideal climate for mining lithium is generally arid, punctuated by seasonal rains or melting. This allows water to pool in shallow, salty lakes and then evaporate during the summer—a cycle that helps concentrate the lithium. Thermal hot springs, volcanic activity, and a subsiding landscape also typically accompany major lithium reserves. Brine operations, mostly in Chile and Argentina, generate about 75 percent of worldwide production. The mining of lithium-containing ore, which is especially common in Australia, accounts for the rest.

The Salar de Atacama in Chile is a large, dry salt flat surrounded by mountain ranges and is one of the driest places on Earth. Parts of the Atacama Desert have gone without rain for as long as people have been keeping track, but water rich in dissolved salts lies beneath this flat surface. The Salar is particularly rich in lithium salts.

Brines from beneath the salty crust are pumped to evaporation ponds, visible as the blue rectangles in these Landsat images. The extremely dry and windy conditions here result in an efficient process. The concentrated salts are left behind after evaporation from which lithium carbonate and other materials can be extracted.

On Chile's Atacama Desert, brine is pumped from underground deposits into ponds where it evaporates over many months, concentrating the "white gold" for extraction. The imprints of future ponds, roads, wells and brine-pumping pipes appear on the surface over time, sketching out the landscape's fate in rectangles of pushed earth. The ponds ripple in royal blue as the months pass signaling the churn of lithium from the evaporating brine creating a visual experience akin to a hypnotic, high-speed Tetris game.

Electric cars, solar products and lithium batteries were China's export highlights in 2022. China, with a burgeoning NEV industry, has a high reliance on lithium imports. In 2022, its lithium carbonate imports from Chile accounted for 89.5 percent of total imports. In the first quarter this year, China imported 38,970 tons of lithium carbonate, up 41.7 percent year-on-year, customs data showed. Industry insiders warned that Chile's plan could weigh in on China's supply of the strategic resource. They urged faster progress on domestic technology breakthroughs for extracting lithium from salt lakes, to secure supplies and cope with global price fluctuations.

China's Tianqi Lithium Corp said that it was monitoring the situation. Tianqi said that it mainly sources lithium from Australia's Greenbushes mine, and it doesn't import lithium carbonate or other lithium products from Chile. Tianqi had purchased a 22.16 percent stake in Chilean miner SQM. The company, along with US-based Albemarle Corp, mines lithium in Chile, with concessions set to expire in 2030 and 2043. Tianqi said it only acquires investment income from SQM's operation, as its relationship with SQM was "based on the stake it holds," the report said. Another Chinese lithium company, Ganfeng Lithium, said it mainly imports lithium minerals from Australia and its imports from Chile are "quite small".

Chinese NEV-maker BYD has not commented on how the plan could affect its business in Chile. BYD has been awarded with certificate that allows it to build factory and produce lithium iron phosphate (LFP) cathodes material in Chile. The factory, with an investment of $290 million, would produce 50,000 tons per year of LFP cathodes and was scheduled to start operating in 2025, according to a statement the company sent to the Global Times.

The United States imports many of the minerals used in EV batteries, such as cobalt, graphite, lithium, manganese, and nickel, with lithium being the predominant mineral. Although use of these minerals is not restricted to battery production for EVs, they are nonetheless important for meeting the increasing demand for EV production. From 2016-2019, over 90% of the lithium imported to the United States came from Argentina (55%) and Chile (36%).