Within the huge, nearly haunting expanse of the excessive Argentine desert, beneath layers of brine and time, lies a component that would simply be mistaken for desk salt. But, this mineral holds the important thing to energy electrical automobiles, cell telephones, and the entire inexperienced power revolution. They name it “white gold” – lithium.
The Cauchari-Olaroz mine, positioned in Argentina’s Jujuy province, guarantees to churn out 40,000 tons of lithium over the following 40 years. However extra riveting than the mineral is the unusual company partnership extracting it. The mine is collectively owned by Canada’s Lithium Americas and China’s Ganfeng Lithium.
As america and China compete globally, Western firms are in search of methods to “decouple” or “de-risk” from their erstwhile Chinese language counterparts. Each firm is feeling the ripples, particularly these within the international hunt for crucial minerals. However on this tempest, an oasis emerges: South America’s Lithium Triangle, encompassing Argentina, Bolivia, and Chile. The Canadian-Chinese language mining enterprise at Cauchari-Olaroz typifies the continued China-West collaboration in South America’s lithium heartland. However within the age of strategic competitors, how lengthy will this tango final?
Chinese language, Western, and Native Collaborations
Over the previous 5 many years, Chinese language mining firms like Ganfeng, Tianqi, and Zijin have gained partial or majority management over crucial mineral mines world wide. Examples embody CMOC’s 80 percent stake within the largest cobalt mine within the Democratic Republic of Congo, and Chinese language firms’ large funding in Indonesia’s nickel industry. Lithium is not any exception; Chinese language firms bought half of all of the world’s largest lithium mines put in the marketplace since 2018.
Chinese language companies additionally aggressively invested in “junior mining companies,” daredevil entities that tackle the dangers of uncovering nature’s buried treasures. Sometimes birthed within the mining cradles of Canada and Australia and nursed on their respective inventory exchanges, these junior miners are at all times thirsty for capital. And Chinese language financiers have been all too comfortable to step in when Western buyers have been busy swooning over the newest tech ventures.
A 3rd technique is to enter into joint ventures with Western and native firms. In Australia, Tianqi has a 51 % stake in Greenbushes, the most important lithium mine on this planet; U.S.-based firm Albemarle owns the opposite 49 %. Ganfeng acquired a big stake in Mt Marion, one other massive lithium mine, together with Australian firm Mineral Assets. The irony is that Australian miners, who churn out greater than half of the world’s lithium, find yourself sending nearly all of it to China, the place practically all of the world’s refining capability resides.
South America can be replete with these sorts of multinational partnerships. In Chile, Tianqi bought a 23 % stake within the nation’s largest lithium producer, SQM, and is trying to increase that stake. Chinese language electrical automobile maker BYD is engaged on a $290 million lithium cathode battery production factory in northern Chile.
In Argentina, Ganfeng and Lithium Americas share possession of the Cauchari-Olaroz lithium mine. Ganfeng is almost all proprietor of Argentine Minera Exar, and not too long ago purchased native Lithea Inc from Argentine oil firm PlusPetrol for $962 million. Zijin is at the moment courting Argentina’s state-run agency YPF to construct a lithium battery cathode plant in Catamarca province, and already owns the Tres Quebradas lithium mine. Chinese language carmakers Chery and Gotion are drawing up blueprints for a $400 million EV battery and automobile manufacturing facility in Jujuy province.
And in Bolivia, Chinese language consortium CATL gained the bid by Bolivian state-owned YLB to assemble two lithium carbonate vegetation within the Uyuni salt mine for $1.4 billion. Chinese language firm CITIC Guoan and Russian Uranium One Group will pool collectively an equivalent sum to assemble two extra lithium vegetation in Pastos Grandes.
The Nice Decoupling
When COVID-19 unfold all through the world, it uncovered simply how weak Western nations’ provide chains have been to China. Since then, U.S. policymakers, together with counterparts in accomplice nations, have been making an attempt to “decouple” or “de-risk” key provide chains from China. Now, for a number of personal firms, collaborating with Chinese language counterparts in industries very important to nationwide safety has grow to be akin to enjoying with fireplace.
Canada is a working example. On July 31, 2023, Lithium Americas decided to split its North American and Argentine operations, probably to defend the North American division from working with Ganfeng within the Cauchari-Olaroz undertaking. A 12 months prior, the Canadian authorities directed three Chinese language entities to divest from Canadian junior mining firms, which included a Canadian-run lithium mining undertaking in Chile. It’s a part of the Investment Canada Act, which can evaluation overseas investments in delicate industries, just like the Committee on International Funding in america.
In the meantime, Australia is in search of to interrupt its dependence on China by boosting its personal home capability to refine lithium spodumene into lithium phosphate salt to promote on to america and different prospects. In February 2023, the Australian authorities blocked the Yuxiao Fund from doubling its stake in Australian mining firm Northern Minerals on grounds of nationwide safety.
Conspicuous Absences
On this grand tapestry of lithium intrigue, one can’t assist however surprise: The place are the European Union, Japan, and South Korea? Whereas the Andean plateaus of South America are teeming with gamers from China, america, Canada, and Australia, these different U.S. allies appear to be lacking in motion.
At the moment the one European carmaker related with the South American lithium trade is BMW, which sealed a take care of Livent in March 2021. However on the sidelines of a July 2023 summit with Latin American and Caribbean leaders in Brussels, EU president Ursula von der Leyen introduced the EU and Chile are engaged on a lithium MOU.
Asia, alternatively, is an enigma. Japan, with its automotive prowess and deep-seated ties with nations like Brazil and Peru, stays conspicuously absent. A decade in the past, Toyota Tsusho entered right into a lithium sourcing settlement with two Argentine firms for the Salar de Olaroz in Jujuy province, however in the present day, there’s nothing to point out for it. In 2021, Japan created the Battery Association for Supply Chain, however there aren’t any indicators that BASC has any plans to have interaction South America.
South Korea has made a bigger funding within the area. In 2018, Korean firm POSCO acquired a big place throughout the Hombre Muerto salt lake, and introduced a $4 billion investment in a lithium mining undertaking there in 2022.
This absence within the lithium race is not only a enterprise oversight; it’s a strategic blunder. These nations’ auto industries contributed considerably to their financial improvement, innovation, and competitiveness. Their lack of significant funding in South American lithium is a strategic drawback which will enable their Chinese language rivals to leapfrog them within the EV transition.
China, which merely many years in the past was a novice within the car area, now stands shoulder to shoulder with the giants. Their ace? Management over 90 % of the lithium refining capability, a strategic benefit that would go away Japan, South Korea, and European rivals chasing shadows.
South American Lithium’s Future
As we stand at this crossroads of financial ambition and geopolitical maneuvering, what is going to the approaching many years maintain for South America’s lithium panorama? The indicators are already upon us.
There’s already a serious push by native governments to have firms maintain the refining, processing, and battery manufacturing inside their nations. In its latest national lithium strategy, Chile said it needs to domestically refine and course of lithium to offer jobs and worth to the Chilean folks. As Chinese language carmakers construct battery factories in South America, evidently Chinese language firms are responding to native authorities necessities.
The car titans of the world are unlikely to stay mere spectators. Direct sourcing and funding offers with mining firms are on the horizon. GM and Ford have already made their strikes, and it gained’t be lengthy earlier than European and Asian juggernauts like BMW, Toyota, and Hyundai comply with go well with. Even the tech giants – Sony, LG, Samsung – could quickly be a part of this lithium frenzy.
But, the lithium stage is huge, and different actors could quickly emerge. In america, geologists not too long ago found lithium deposits alongside the Nevada-Oregon border – doubtlessly among the many world’s largest. The Salton Lake in southern California, dubbed the “Lithium Valley,” in addition to Nevada’s Thacker Pass, beckon with promise. In India’s Himalayan foothills, an enormous reserve of spodumene lithium has been found, although the shadow of Kashmir’s battle looms giant and will make entry to this treasure as elusive because the peace that might unlock it. Nations like Brazil, Mexico, and Peru, too, are scouring their terrains, hoping to unearth lithium treasures.
These nations blessed with lithium’s bounty would possibly quickly discover themselves wielding geopolitical clout. In the event that they navigate this period of strategic competitors with sagacity, balancing fiscal prudence with environmental stewardship, they may not solely draw positive aspects from america and China but in addition elevate the lives of their citizenry.
Conclusion: The Finish of the China-West Lithium Tango?
Within the theater of world commerce and politics, the notion of “decoupling” usually feels like a requiem for collaboration. But, the world of enterprise is aware of no borders. The Chinese language-Western symphony within the lithium realm was not a mere accident; it was a confluence of financial knowledge and shared experience. Some Chinese language entities, having honed their expertise over time, possess superior technological prowess. For instance, Ford is working with CATL to construct an EV plant in Michigan, though that plan is dealing with congressional pushback. By erecting partitions and asking Western corporations to rediscover the wheel, we danger not simply stalling innovation but in addition derailing the worldwide inexperienced transition.
If the mantra is to be one in all unrelenting rivalry, then the West should set its sights on South America’s lithium bounty and intention to outcompete China.
First, america, allies, and companions have to formally embody Argentina and Chile within the State Division’s Mineral Security Partnership, a gaggle that ensures crucial minerals are produced, processed, and recycled with the very best high quality requirements. Doing so will ship a robust message of South America’s significance within the lithium international provide chain.
Second, U.S. policymakers want to offer incentives for U.S. firms to be extra lively in Argentina and Chile. The U.S. ought to embody Argentina as one of many nations that qualifies for particular advantages beneath the Inflation Discount Act. Proper now the IRA supplies EV tax credit solely to vehicles whose batteries and minerals have been produced throughout the U.S. or a rustic with which the U.S. has a free commerce settlement. Chile at the moment counts as a result of it’s an FTA accomplice; Argentina, regardless of its giant lithium reserves, is excluded as a result of it doesn’t have an FTA with america.
The U.S. must also think about increasing the Defense Production Act – which permits the president to direct personal firms to prioritize orders from the federal authorities – to incorporate lithium in Argentina and Chile. In Might 2023, the Pentagon requested Congress to increase the DPA to incorporate the UK and Australia; it may do the identical for these two South American nations.
Third, U.S. firms must also think about creating deeper relationships not solely with the Argentine central authorities, but in addition the provincial governments of Jujuy, Salta, and Catamarca. In Argentina’s federated system, the provinces have full jurisdiction over their lithium sources. Chinese language firms have lengthy understood this and have made a concerted effort to ingratiate themselves with provincial leaders. U.S. and Western firms ought to do the identical, whereas refraining from partaking in corruption. The prospect of working with Bolivia is kind of low as a result of Arce administration’s elevated relations with China and Russia. Nevertheless, america ought to search for home windows of alternative to have interaction the Bolivian authorities sooner or later.
Fourth, the U.S., allies and companions mustn’t put self-imposed limits on lithium exploration and manufacturing. Washington’s gaze, each geographically and when it comes to funding phases, is woefully slim. All the U.S. authorities’s investments are centered domestically, which is sensible politically, however doesn’t have in mind the worldwide nature of the lithium provide chain.
The U.S. technique can be restricted by its life cycle. At the moment, U.S. government-supported abroad financing can’t go into early stage mineral exploration. Nevertheless, firms are nonetheless making an attempt to discover numerous areas world wide for potential lithium deposits. And it’s restricted by the financing construction, focusing solely on loans, or personal fairness. As an alternative, U.S. entities ought to depend on blended financing via stakes, loans, and mergers and acquisitions, identical to their Chinese language counterparts.
Lastly, U.S. businesses and corporations ought to pool sources with their allies and companions to put money into lithium mining initiatives. On the August 18, 2023 Japan-South Korea-U.S. summit at Camp David, the U.S. Improvement Finance Company, Japan Financial institution of Worldwide Cooperation, and South Korea’s Export-Import Financial institution agreed to cooperate on financing infrastructure, data know-how, provide chain resilience, and local weather initiatives within the Indo-Pacific and past. One among their first initiatives exterior the Indo-Pacific ought to be investing in a South American lithium mining undertaking. Such investments mustn’t solely embody the mines themselves however the infrastructure round them too – together with roads, procurement companies, and know-how suppliers.
The highway to lithium dominance is strewn with challenges – distant locales, daunting altitudes, and treacherous terrains. Nevertheless it’s this very adversity that gives the West, alongside its allies and companions, a golden alternative to speculate, innovate, and illuminate the lives of tens of millions.
Ultimately, the South American lithium saga is not only about powering glossy Teslas. It’s a couple of imaginative and prescient, a promise – of prosperity, progress, and a brighter tomorrow for the folks of Argentina, Bolivia, and Chile.
