On January 4 local time, Chilean parliamentarians submitted a bill to the local house of representatives to apply for an injunction to prevent the outgoing Pinera government from bidding for the mining right of 400000 tons of lithium resources in Chile. At present, the world's two largest lithium giants, Chile mining and chemical (SQM) and Albemarle, are bidding for the project.
In October 2021, Chile announced to provide five 80000 ton quotas to domestic and overseas companies, totaling 400000 tons of exploration and production contracts. The successful bidder will receive 7 years of exploration and development projects and 20 years of production time. Chile will charge royalties for quota allocation and variable payments during production. At present, the bidding process is drawing to a close and is expected to end in mid January.
Members of Chile's center left party for the Democratic Party (PPD) asked the Santiago court of appeal to suspend the bidding process. "Lithium is a natural resource of strategic importance to Chile, and the government of current Chilean President Sebastian Piera is putting the overall interests of the country at risk." One of the sponsors, Congressman RA ú l Soto, said.
The proposed legislation will postpone the granting of lithium mining rights until the new constitution drafted by parliamentary representatives elected last year is adopted. If the bill is passed, the bidding planned by Juan Carlos jobet, Minister of energy and mines and Minister of mines and energy, on January 14 will be cancelled.
Gabriel boric, who was elected the current president of Chile, said that Chile should not repeat the historic mistake of privatizing lithium resources. Boric advocated increasing the equity ratio of mining and establishing a state-owned lithium company. During the election campaign, he promised to increase the taxes of mining enterprises and the royalties of mining privileges, so as to provide funds for more social projects and reduce inequality.
On December 19, 2021 local time, boric, candidate of the left-wing political party alliance "in favor of dignity", was elected the 34th President of Chile with a high vote rate of 55.87%. He will officially take office on March 11, 2022 for a four-year term.
At the end of the three-month transition period, Pinera will officially step down, and boric and his team will take over the Chilean government. If the bidding for the 400000 ton lithium mining contract is finally blocked, it will further aggravate the shortage of global lithium supply.
It is reported that nearly 80% of the world's lithium resource production is concentrated in the four lakes in the Americas and the six mines in Australia. Chile is in the "lithium triangle" in South America with the richest lithium resource reserves in the world. According to the statistics of the U.S. Geological Survey (USGS), the global lithium resource reserves in 2020 will be about 21 million tons of lithium metal equivalent (1 ton of metal lithium = 5.322 tons of lithium carbonate), of which Chile's lithium resource reserves will be 9.2 million tons of lithium metal equivalent, ranking first in the world with 44% share.
Although Chile is one of the countries with the largest reserves of lithium resources in the world, only domestic enterprises are allowed to participate in the development of lithium mines before this bid. According to USGS data, the global lithium output in 2020 will be 82000 tons of lithium metal equivalent, equivalent to about 440000 tons of lithium carbonate equivalent. The total bidding volume of Chile is 400000 tons, which is close to the global supply of lithium resources in 2020.
The huge lithium contract not only attracted bids from five global lithium giants such as Chile mining and chemical (SQM) and Albemarle, but also received a lot of criticism from left-wing lawmakers. According to its allegations, the tender also violated the provisions of consultation with indigenous communities near the mining site in the Atacama Desert in the north of the country.
In this regard, the Chilean government defended the bidding, saying that the bidding process has been highly transparent and that these companies will become national partners in mining enterprises. He also said that the five quotas in the bidding are only equivalent to 4.4% of Chile's known metal reserves, which does not hinder the establishment of state-owned lithium companies.
"Until 2016, Chile was the world's largest lithium producer, with a market share of up to 37%, but now it has fallen to 31%, overtaken by Australia." Chilean mining and energy minister Jobert said on twitter, "if we do not try to increase production, Chile's market share will further decline to 17% by 2030." The official revealed that the current government plans to hold talks with the incoming borrich team to review the background of the bidding process.
In recent years, the global output of new energy vehicles has increased rapidly, the demand for power batteries has been expanding, and the price of upstream lithium materials has also increased.
According to sqm data, in 2020, the global sales volume of new energy vehicles reached 3.125 million, a year-on-year increase of 41.4%. In 2020, the global demand for lithium will be 330000 tons of lithium carbonate equivalent, with a year-on-year increase of about 7.5%. In terms of demand structure, the battery accounts for about 75%, which is the largest demand end. Among them, the proportion of power batteries has also increased from 46% in 2019 to 54% in 2020, with a rapid growth rate.
Standard & Poor's global (S & P global) reported in December 2021 that there will be a lithium shortage in 2022 as the use of lithium exceeds the production and depletes the inventory. The report predicts that the supply of lithium carbonate will increase from 497000 tons in 2021 to 636000 tons, but the demand will also increase from 504000 tons to 641000 tons.
In addition, according to the forecast data of the International Energy Agency, driven by the demand of the downstream market, there will be about 50% lithium demand gap in the world by 2030 only relying on the existing and under construction lithium production projects.
For the current changes in Chile's political situation, China International Capital Corporation Limited(601995) believes that considering the cycle required for constitutional amendment, the short-term impact of changes in Chile's political situation on global lithium supply and demand is limited, but it brings greater uncertainty to the release of new supply in the long term. In this context, the diversification of lithium resource supply pattern may further accelerate, and the acceleration of potential resource development in China, Argentina, Africa and other places will be the general trend.
(surging News)
