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.
The overarching goal of creating an “OPEC of lithium” should not be for lithium producing countries to nationalize their deposits of the white metal, but rather to ensure that they have much greater influence and control over this rapidly expanding market as well as over the mining projects taking place on their territory, says renowned Mexican geopolitical analyst Alfredo Jalife. In short, it is about rebalancing the power dynamics.
In June, Argentina’s President Alberto Fernández met up with his Chilean counterpart, Gabriel Boric, on the fringes of the Summit of the Americas in Los Angeles to discuss increasing cooperation for the development of the lithium industry. They also launched a “Binational Working Group on Lithium and Salt Flats”, which will apparently support the development of binational cooperation. Mexico has also shown an interest in joining an “OPEC for lithium”.
“There has been some communication with the president of Bolivia, who in turn has a relationship, like us, with the president of Argentina, which also has lithium, as well as with the president of Chile, with the purpose of creating an association to help us mutually,” said Mexican President Andrés Manuel López Obrador (Aka AMLO) in May.
The Argentinean financial daily Cronista recently reported that Fernández received an invitation from AMLO to visit Mexico City on his return from the Summit of the Americas. There they would announce, together with their Chilean and Bolivian counterparts, the launch of an “OPEC of lithium”. But according to the Cronista article, Fernández considered it imprudent to have a stop-off of this import on his return from an event that AMLO was conspicuously absent from. What’s more, as a source of lower quality lithium, Mexico would be a second-tier member of any future alliance.
A Convenient Oxymoron
Calling such an alliance an “OPEC of lithium” is, of course, an oxymoron, says Jalife. After all, OPEC is a price-setting cartel for producers of petrol not lithium. But it has been a very effective tool for ensuring a significant degree of sovereign — as opposed to corporate — control over oil prices, and as we’ve seen in recent months it remains highly relevant to this day, more than 60 years after its creation. As such, adopting the temporary moniker “OPEC of lithium” represents, if nothing else, a powerful marketing strategy.
Jalife also recommends that countries that join any such future association should set up their own sovereign wealth fund or bank to manage the proceeds from their lithium sales. They should also denominate those sales in a strong currency that is not the dollar, he said. Jalife also had a word of caution for any governments involved in the project: “Do not assume that just because you have set up an OPEC of lithium, you will have free range of action. There are going to be some very powerful reactions from the countries affected.”
Those countries include, of course, China, which already dominates the global lithium market, as well as its biggest geopolitical rival, the United States, which is desperately trying to catch up with China but whose brand “has lost much of its shine in Latin America in recent years,” as Gavekal Research puts it. Lest we forget, in 2019, Bolivia’s then President Evo Morales suffered a coup which he blames in large part on companies with commercial interests in the lithium sector, including TESLA whose CEO Elon Musk famously tweeted: “We will coup whoever we want. Deal with it!”
One can rest assured that Washington is not going to go quietly into the night as China expands its influence throughout the US’ own direct neighborhood. Nor is it likely to stand by idly as resource-rich countries in the region begin setting up a price-setting cartel for one of the most important minerals of the future, which many US and European manufacturers desperately covet.
The Biden administration is already stepping up its criticism of China’s growing influence in Latin America, as I reported just a couple of weeks ago. Somewhat ominously, it appears to have chosen the Pentagon as its mouthpiece. In an interview with the Spanish edition of Voice of America, the Commander of US Southern Command, General Laura Richardson, accused Beijing of using “debt trap” diplomacy to expand its power and reach in Latin America.
Richardson raised the tone during her address last week to the 2022 Concordia Americas Summit in Miami. Perched between Colombia’s outgoing president Ivan Duque’s Ambassador to the US, Juan Carlos Pinzón, and Carlos Vecchio, who claims to be Juan Guaido’s diplomatic representative to the US, the four-star general said the following in a clunky, meandering, grammatically challenged speech on Latin America’s economic importance to the US that should chill the spine of any leader of a resource-rich Latin American country:
This region is so rich in resources. Rare earth minerals, lithium. The lithium triangle is in this region. There are a lot of things that this region has to offer… The Belt and Road Initiative — 21 of the 31 countries [of Latin America] are signatories. Over the last five years, 2017 to 2021, investment of over $50 billion, I think it might be closer to $100 billion of Chinese investment in this region (sic).
I think they’re playing chess. Russia is also prevalent in this region and I think they’re playing checkers. I think they’re there to undermine the United States, they’re there to undermine democracies and they all mean business. Whether they’re playing chess or checkers, they’re there to undermine democracy. And quite honestly, with all the disinformation and the Russia Today Español, Sputnik Mundo, over 30 million followers of Russia were on social media (sic). I mean this is very concerning…
We have a lot of important elections coming up or just happened (sic) and we have to continue to stay engaged and concerned with this region.
A “Metallic Nato” Is Born
It’s not just tough talk from the US’ top brass that should have lithium-rich countries in Latin America worried. In June, the US government signed, to minimal fanfare, a “minerals security partnership” (MSP) with some of its strategic partners, including the European Commission, Canada, Australia, Japan, the Republic of Korea and the UK. In a press statement, the US Department of State said:
“The goal of the MSP is to ensure that critical minerals are produced, processed, and recycled in a manner that supports the ability of countries to realise the full economic development benefit of their geological endowments.”
As NC reader Sardonia put it sardonically, this is “surely some of the most polite language ever heard from someone holding a gun to someone else’s head as they demand the contents of their victims’ purse.” The US describes the partnership as a coalition of countries that are committed to “responsible critical mineral supply chains to support economic prosperity and climate objectives.” In what is almost certainly a more fitting description, Reuters dubbed it a “metallic NATO.”
“The goal of the MSP is to ensure that critical minerals are produced, processed, and recycled in a manner that supports the ability of countries to realise the full economic development benefit of their geological endowments.”
Why, that’s some of the most polite language I’ve ever heard from someone who is holding a gun to someone else’s head as they demand the contents of their victims’ purse.
What a great description, Sardonia. If you don’t mind, I’d like to use it in the article.
Feel free. Great article.
China ( 5.1 tonnes), Argentina (14.8 million tons) and Chile (8.3 million tons) – those don’t really sound like massive deposits that. Went to Google and it said that the total global reserves are estimated at only 14 million tons. At the increasing rate that we are using Lithium, we could be seeing supply collapse in a decade or two as a guess. You would think that we would be recycling now every singe ounce of this stuff that we can. But we live in a capitalistic system which says to just keep on using it as fast as possible. Just the other day I saw a sub-headline that said ‘Enough lithium to power 1,200 electric car batteries is reportedly wasted every year.’ So what were they talking about? Here is the key section-
‘Some 10 tonnes of lithium end up in UK landfills every year as disposable vape users throw out on average two pens containing the substance every second, Sky News revealed on Friday. While the average vape battery contains just a tenth of a gram of the metal, it adds up quickly, amounting to enough lithium to make batteries for 1,200 electric cars, a joint investigation by the broadcaster and the Bureau of Investigative Journalism showed.’
And that is just the UK.
Thanks for the background, Rev. Indeed and it dovetails with yesterday’s post about sustainable manufacturing. How can we not bother with lithium reclamation when it is critical and in naturally short supply?
Time to set up a landfill mining company consortium?
Seems i read somewhere that it can be obtained from sea water.
The best approach appears to be developing fast here in NZ. Extraction of lithium from geothermal liquid investigations here have had many extra bonuses as each solution to problems encountered has added to the viability of extracting lithium.
Initially, for geothermal generation, silica is a problem in that extracting too much heat gums up the works with silica. However, lithium extraction also requires silica extraction an silica is also a valuable product. So geothermal generators are begging the company, Geo40, to come and extract lithium! Another benefit may be the ability to add CO2 to the liquid that is returned into the ground.
A more recent update of the story here
The nationalisation of the resource is a first step on the right direction. Second step would be to ensure that the proceeds of mineral extraction are not subject to massive corruption at any level. Third it would be wise for them not to depend too much on China though now, because China is the country with the highest processing capability, this is unavoidable for them. Shame on the West and the globalization push now clearly over. Somehow the west has suddenly realised something was wrong with it.
We, the collective idiots in the West, have now changed the narrative in such a radical way, seeing enemies everywhere and now ‘competition’ is something that we dislike… how fast the world is changing!
Loosing in Ukraine, i would bet the metallic NATO is poised to loose its ‘war’. Simply because we have lost our ability to do industrial planning and we rely too heavily on “markets”.
Good article again Mr. Corbishley! It might occur that in the end demand for Li cools one day if better alternatives come up but today this looks really like a big deal. We will see.
Yes, and since lithium is not a consumable like oil, there are a number of ways countries can use their deposits to benefit the populace in a less corruptible manner. E.g. exchange some of the exports to China for grid-level batteries and solar panels, which would be harder for elites to transfer out of the country (and always available for nationalization in the future if they were sold privately now). Or use those solar panels to recycle water (and eventually, lithium itself) to make mining both more sustainable and stabilize its costs and capacity.
The economics and politics of switching energy sources from a consumable to a durable good seem genuinely unappreciated, IMHO. Every percent of a country’s energy use that that it converts to renewables and storage means *less* dependence on any cartel, market forces, or even international finance, which is the opposite of oil. Of course, countries that have used the oil economy as a instrument of power don’t want this to happen…
It also means that the time for lithium-rich countries to benefit from their stocks is front-loaded, as it’s probably a market that will drop in price over time, as you sell to less rich populations and fossil fuels drop in price with increased electrification.
I spent some time to try to find out what tools would be given to MSP and I couldn’t find anything.
I suspect that one of the tools might be some sort of Investor State Dispute Settlement (ISDS):
& if there is an ISDS then the irony is that to secure control of mining then the control of mining would be surrendered. Supposedly the private sector, in this case specifically the mining industry, would never put other interests such as profits come above the public good.
Fear other nations but multinational companies are apparently always to be trusted….
If there was ever an expert on “debt trap diplomacy” it would be the U.S.. That’s been their MO for over a century.
Whenever I read an elite U.S. official whining about “ they’re there to undermine democracy“ I cringe. I have to wonder how many of the countries that have signed-onto the Belt-and-Road initiative have had their government toppled by a U.S.-supported coup d’etat in living memory? How many have seen their currencies collapse under debt to U.S.-controlled banks? How many have been looted by local oligarchs who for decades took their bribes denominated in U.S. dollars but are now showing openness to the Yuan?
I suppose that I have a different definition of “democracy” than American elites do.
It is a slight possibility, but I would not rule out the return of “Gunboat Diplomacy” in this arena.
When elites begin to lose power, they often dredge up old working methods and flail about with them in a desperate attempt at reconstituting the “Good Old Days”; when Grandad could play ‘Lord of the Manor’ over the ‘natives’ down South.
Alas for the ‘True Believers’ of today. We are now the “natives down South.”
Gunboat diplomacy over whom? Americans? Cops and carceral state already do. And Africa and Centrsl and South America already are subject to that sort of “diplomacy.” Some 600 or 700 gunboat installations and “lily pads” dot the planet, with all kinds of ugly local effects.
A future that is already here…
The enormous inland sea that covered the western US has left lithium deposits in the top soil. Like a salt flat, the lithium just settles there. The news blurb last year about lithium manufacturing in north west Nevada had no follow up. There’s very little local water there for processing lithium. But if there were enough lithium on the ground, water could be pipe-lined in. Considering how common inland seas once were, and salt flats are, it would seem to me that lithium will be an available resource for a long time. What about the Dead Sea? Is it full of lithium too – both lithium and the water to process it? The Great Salt Lake? Lop Nur in China. Blablablah. Maybe the biggest problem is that there might be no way to limit the use of lithium. No way to monopolize it. Making it difficult to profiteer.
There’s a lot of excitement about the possibilities of the Salton Sea. The DoE seems to be holding a contest for extraction technologies, which is cool.
Here’s the state report from 2020:
Some need to ponder the reason a Billion is bringing water over the mountains from the pacific to supply South American processing.
“There are also important environmental considerations to take into account given the devastating environmental damage and intensive water consumption that comes with lithium production.”
And then there is the water use for microchip manufacturing:
Note this bit from the linked article:
“This indeed reflects the pressures expected from a world facing a water scarcity crisis. Many of the production plants are already located in water stressed areas (Southwest US) (Howell n.d., PNPPRC 2000). Much research and development has therefore been centered on decreasing the water-use footprint in order to maintain sustainable production practices….”
But all people talk about is the heat/weather/climate effects on water supplies. Hmmm….
the technology that dare not speak its name – fusion – will depend on consuming lithium to produce tritium fuel. It may be that until seawater extraction of lithium is perfected, no breakthrough in this field will make any difference. Or it will have to wait for lunar tritium mines.
If Chile’s new constitution is adopted, and it is one of the most progressive in the world, will this result in a transfer of some of the lithium assets to state ownership or sovereignty?
Given the facility and ubiquity of corruption and corruptible politics, like Nigeria and lots of other places, settling sovereignty over resources is zero guarantee of decent or wise or appropriate use.
Good question. As far as I can tell (and I’ve only looked at a couple of sources), there will be no significant changes to the ownership of Chile’s mines or mineral resources. According to the left-wing news website Izquierda Diario, 51 years after the Allende government’s nationalization of copper, which some argue helped seal Allende’s fate, 71% of mining production in the country is in private (and almost exclusively foreign) hands. The new constitution will do little to change that since the constitutional convention voted against the possibility of any renationalization of copper and other minerals. There may be one consolation, however, and that is that the scandal tarnished “King of Lithium”, Julio Ponce Lerou, who was once upon a time Pinochet’s son-in-law but now faces all sorts of corruption charges, may end up being stripped of his huge lithium holdings, estimated to be worth around $3.5 billion.
Sources (in Spanish):
Yeah, it’s a good thing that the USA has maintained such cordial relations with all those Monroe Doctrine fiefdoms. I’m sure they will trust us to help them mine the Lithium our God put there for us. /s
Tangential but eye-opening: can somebody plz explain “General Laura Richardson”? That “speech” quoted above has the coherence of your average Trump snake-oil pitch; despite my skepticism of the leaders of the US Military, I would still expect a four-star General to have someone write a decent speech for the occasion. OTOH, perhaps the meta-point is that a meeting of little brown people organized by the State Dept is a very low priority for the Pentagon? Yep, this is how we have built such solid reputation for smart diplomacy…
The definition of an ‘orebody’ is economic – rock that can be dug up at a profit – and that in turn is a function of many things including what’s in the ground to start with, the technologies available to extract it, the available infrastructure and so on.
So, geologists and mine financiers distinguish ‘proven reserves’, roughly what’s known and expected to be profitably extractable to a high degree of confidence plus various categories of lesser certainty. Proving the reserve in a deposit is expensive so miners don’t do more than necessary even when everyone knows the ‘proven reserves’ are only the tip of an iceberg. Inevitably the distinctions tend to get lost in translation leading to angst about running out of this or that based on the typically rather small figures for proven reserves.
Moreover, until batteries came along, lithium had limited uses, production was accordingly small, mining companies weren’t interested, extractive technology wasn’t worth investing in, and ‘proven reserves’ were correspondingly tiny. That’s changed but there are lead-times to find and prove more and bigger reserves.
Bear in mind also that BEVs contain large amounts of valuable lithium and other metals, so the vast majority will be recovered when batteries are scrapped but that won’t be on any scale for a few years yet.
The lithium market is changing fast. Fortunes will be made and lost, but my guess is that ultimately there will prove to be more than enough of the metal.
There are major environmental conflicts with Lithium sources in many areas on western public lands. Not “just” water. Sacred indigenous sites – springs in Arizona, brutal massacre site and crucial Sage-grouse habitat at Thacker Pass. A lithium claim staking bonanza is well underway – witness the appalling McDermitt Creek Jindalee site that would be the ruin of a beautiful biodiverse SE Oregon area and eat the heart out of an area ringed with Sage-grouse leks, crucial Pronghorn and Mule deer winter habitat, etc. Claim stakes (and boasting claims stakers hyping their boom-to-be) are now showing up on the margin of the Alvord playa – even though this area was withdrawn from geothermal and mining development in the Steens Wilderness deal. Meanwhile, the Interior Department appears to be eagerly abetting this – fast-tracking the Thacker Project under Trump and Bernhardt. Now Biden-Haaland digging in defending Trump’s deeply flawed analysis — apparently eager to facilitate Manifest Destiny-style rape of some of the least developed areas of the West.