On May 22 local time, Chilean mining minister Marcela Hernando said that the Chilean government had decided to establish a state-owned lithium enterprise and planned to establish an operation model for the company by the end of this year. According to its disclosure, although the state is the main shareholder of the state-owned lithium enterprise, the government will still open investment to private capital.
Hernando said in an interview that the government is setting up a special group of state-owned lithium enterprises to determine the best plan for operating the company by the end of the year, including how the company will develop and what business model it will operate.
“Although the Chilean government is determined to promote the collection of mining royalties, lithium will not be included in the plan.” “The evaluation results show that the situation of the lithium industry is very complex. It is an immature industry,” Hernando explained
In the context of global carbon neutrality, the electrification trend of the automotive industry is accelerating, which has greatly boosted the demand for lithium batteries. As the core raw material for the production of electric vehicle batteries, lithium has become a scarce resource competed by many parties, and the price has reached new highs in recent years. According to the statistics of benchmark mineral intelligence, a professional information provider in the electric vehicle industry, the price of lithium has increased by 490% in the past year.
Data source: East Asia Qianhai Securities Research Report
Nevertheless, the gap between supply and demand of lithium resources is still expanding, and the resource premium will continue to exist. The commercial data platform statista shows that the demand for lithium will at least double in the next five years, and the global demand for lithium is expected to reach 1.79 million tons of lithium carbonate equivalent (LCE) in 2025. According to the prediction of the International Energy Agency, driven by the demand of the downstream market, only relying on the existing and under construction lithium production projects, there will be about 50% lithium demand gap in the world by 2030.
Facing the booming lithium market, Chile and other countries located in the “lithium triangle” region of South America are eager to take a share of it with their own resource advantages. Mexican President Lopez said on May 3 that Mexico is cooperating with the governments of Chile, Argentina and Bolivia to establish a lithium industry association so that these countries can share their experience in developing battery related minerals.
Public information shows that nearly 80% of the world’s lithium resource production is mainly concentrated in the four lakes in the Americas and the six mines in Australia. According to the United States Geological Survey (USGS), the “lithium triangle” region of Chile, Mexico, Argentina and Bolivia has nearly 56% of the world’s metal resources.
Among them, Chile is the country with the richest lithium resources in the world and the second largest lithium producer in the world. In 2020, Chile’s lithium resource reserves were 9.2 million tons of lithium equivalent, accounting for 44% of the global reserves. In addition, according to the data of Shanghai Nonferrous Metals network, Chile’s lithium production capacity accounted for 24% of the world’s total production capacity in 2021.
Chile’s rich lithium resources are mainly in the hands of two private enterprises, Chile mining and chemical industry (SQM) and American Yabao (ALB). Chilean mining and chemical industry is the largest chemical enterprise in Chile, with an annual capacity of 120000 tons of lithium carbonate in salt lakes, accounting for about 34% of the global Salt Lake capacity. American Yabao is the world’s largest lithium producer. At present, it holds 100% equity of Atacama lithium mine in Chile, and the annual production capacity of the project is about 145000 tons of lithium carbonate.
Operation overview of sqm in northern Chile
Due to the high concentration of global lithium industry, the situation of Chile’s lithium industry is not an example. According to public data, four enterprises, namely, American arbor (ALB), American FMC’s living, Australian talison (TLH) and Chilean mining and chemical industry (SQM), account for about 70% of the world’s lithium resources and about 90% of the world’s lithium production capacity. Among them, talison Australia accounted for 51% of the shares by Tianqi Lithium Corporation(002466) and Yabao 49%, while Chile mining and chemical industry accounted for 25% by Tianqi Lithium Corporation(002466) and
At present, the salt lake lithium extraction projects that have released production capacity in the world are mainly concentrated in South America, and have basically been monopolized by major mining giants. Atacama Salt Lake in Chile is mined by Yabao and sqm, and olaroz Salt Lake in Argentina is mined by Yabao, Ganfeng Lithium Co.Ltd(002460) and lithium industry in America; Hombre Muerto Salt Lake in Argentina belongs to Livent, and Mariana lithium potassium salt lake in Argentina belongs to Ganfeng Lithium Co.Ltd(002460) .
In this case, during the election campaign of Chilean President Gabriel boric, who came to power in March this year, he repeatedly stressed: “Chile should not repeat the historic mistake of privatizing resources.” He advocated raising taxes and royalties for mining enterprises, and intended to set up a state-owned lithium company to develop lithium mines in China.
In October 2021, the government of former Chilean President Sebastian Piera announced that it would provide five lithium exploration and production contracts with a total of 400000 tons to domestic and overseas companies. The successful bidder would receive seven years of exploration and development projects and 20 years of production time. Both Chilean mining and chemical industry and American Yabao participated in the bidding for the project.
In January 2022, at the end of the bidding process, Chilean parliamentarians proposed a bill to the local house of representatives to grant the Chilean government exclusive mining rights for lithium, rare metals and hydrocarbons, and applied for an injunction to prevent the Pinera government from bidding for the mining rights of 400000 tons of lithium resources in Chile.
The proposal to expand the “nationalization” of Chilean minerals was voted down at the constitutional assembly held on May 14. Since the proposal will cause heavy damage to foreign enterprises participating in Chile’s mineral development and aggravate the tension between supply and demand of global mineral resources, it has been strongly opposed by major mining companies since it was put forward.
Lithium resources mean the right to speak in the field of new energy vehicles and energy storage in the future. The European Union has listed lithium as one of 14 key raw materials, the United States regards lithium as one of 43 important mineral resources, and China positions lithium as one of 24 national strategic mineral resources. With the increasingly fierce global lithium competition and the attack of major mining giants outside China, the Chilean government can only place the hope of grasping lithium resources on the establishment plan of state-owned lithium enterprises.
