Big Things Are Happening in the Lithium Triangle

As the global race for “white gold” intensifies, the so-called “Lithium Triangle” in South America is taking on increasing importance in the global economy.

Despite a recent correction, the price of lithium is still through the roof, as demand for battery cells far outpaces supply. Spot prices for battery-grade lithium in China — where three quarters of all battery-making capacity is located — have surged more than 600% so far this year, from about $10,000 per metric tonne in January to $62,000 in June, according to Benchmark Mineral Intelligence. Citi Group has forecast that prices will continue to rise as a “structural shortage” of the metal persists, meaning there isn’t enough capacity in the industry to satisfy demand.

The International Energy Agency projects the value of global lithium sales could grow 20-fold between 2020 and 2030, and that is putting huge pressures on the price of many electronic goods, including electric vehicles. Lithium is a critical component of the green energy transition plans of countries like China, the EU and the US. Also known as “the new oil” or “white gold,” the metal is used to make the lithium-ion batteries that power electric vehicles (EVs), smartphones, and wearables.

The global race is now on to secure supplies of the white metal, which for the moment China is winning handily. The Asian giant is already the number one refiner of processed lithium and the number one maker of lithium batteries, according to energy consultancy BloombergNEF.

“It refines 60% of the world’s lithium, controls 77% of global battery cell capacity and 60% of the world’s battery component manufacturing,” notes a recent report by Gavekal Research. “Of 200 battery mega-factories in the pipeline to 2030, 148 are in China.”

China has also been moving into lithium mining in a big way. Despite holding only 5.1 tonnes, or 7 percent, of the world’s proven lithium reserves, China is now the fourth-largest producer. It also boasts the world’s largest lithium miner, Ganfeng Lithium Co, which owns the rights to the world’s largest lithium deposit, in Sonora, Mexico. Gavekal counted six completed or pending deals between Chinese companies and developers of lithium projects in South America, the region of the world with the largest lithium reserves.

Bolivia, Argentina, Chile: The Three Sides of the Lithium Triangle

Bolivia has the largest known reserves in the region (and by extension the planet) with an estimated 21 million tons of the mineral, though it has struggled to find a way of successfully exploiting those reserves. According to the Chilean newspaper El Ciudadano, the country will open its first lithium plant next year, on the edge of the Salar de Uyuni, the world’s largest salt flat. Together with neighbouring Argentina (14.8 million tons) and Chile (8.3 million tons), Bolivia comprises the so-called “lithium triangle” which accounts for a staggering 63% of the planet’s known reserves.

Last week, Ganfeng Lithium announced plans to buy up the Argentinean company Lithea Inc., which has salt lake assets to the west of the city of Salta, in northern Argentina. Lithea’s first phase of production is expected to reach annual capacity of 30,000 tons of lithium carbonate. According to Bloomberg, Argentina has the world’s largest pipeline of lithium projects with an estimated 19 million metric tons of resources yet to be tapped, over which Chinese and US companies have been locked in bidding wars.

Argentina’s government, with record high debt levels of $370 billion, equivalent to six times the total debt it owes the IMF, needs the money desperately. Like its lithium-rich neighbors, Bolivia and Chile, it wants to make sure it (and hopefully by extension its voters) benefit from the gathering lithium rush. This is part of a broader trend of growing resource nationalism in the region that has global mining companies and their investors extremely concerned, and which I discussed in my February 11 article, “Resource Nationalism on Rise in Latin America, As Fever for ‘White Gold,’ aka Lithium, Grips the World“.

Toward an OPEC of Lithium?

Bolivia was the first country to nationalize its lithium deposits, which it did way back in 2008. In April this year Mexico, with the ninth largest reserves on the planet, did the same though it has not expropriated any mining projects since then. Now there is talk of creating an association of lithium-producing countries that will function in a similar way to the Organization of the Petroleum Exporting Countries (OPEC), whose creation in 1960 wrested much of the control over global oil prices from the so-called “Seven Sisters” grouping of multinational oil companies.

Due to the sheer size of their deposits, Bolivia, Argentina and Chile could in the future set the price of lithium in the international markets, just as OPEC has done for oil. Argentina and Bolivia already signed a partnership agreement in April this year.

Of course, to set up a functional association, the three countries of the lithium triangle will have to overcome certain obstacles, including their markedly different regulatory and ownership models. The exploitation of lithium in Chile lies in private hands whereas in Bolivia it is state-owned and in Argentina provinces have sovereignty over the resources of their territory. There are also important environmental considerations to take into account given the devastating environmental damage and intensive water consumption that comes with lithium production…

Read the full article on Naked Capitalism

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