Atacama Desert, Chile. Photo by Diego Jimenez on Unsplash.

What’s Coming With Chile’s National Lithium Strategy?

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Gabriel Boric, president of the world’s second largest producer of lithium, Chile, announced on April 20 that the country was adopting a “National Lithium Strategy.” And … that was pretty much it.

I wish there was more to it. I wish I could say that the media exploded, that omens for the inevitable destruction of the industry were issued by the right, that promises of endless wealth for the people were said by the left. I mean, isn’t that what we all expect in these latitudes? What’s politics without a little drama?

Eh. Chileans are different, I guess. They were probably too invested into their constitutional elections to pay attention to this. But then again, what was this new strategy all about?

The Basic Tenets of the “National Lithium Strategy”

Chile’s National Lithium Strategy (which I will refer as “NLS” from now on) seems to be more of a series of loose political objectives and concepts, and less of a structured strategy. The document presented by the Chilean government includes 7 objectives and 8 “milestones” to be achieved. The objectives are presented as follows:

  1. To make Chile wealthier.
  2. To develop a sustainable industry for Chile and the world.
  3. To promote technologic development and create production chains.
  4. Environmental and social sustainability (this was sort of included in 2).
  5. Fiscal sustainability.
  6. To promote productive diversification and regional growth (this was sort of included in 3).
  7. Via the articulation with national and international actors, to make Chile a leader in the lithium industry worldwide.

Nothing noteworthy here, except perhaps for the items related to sustainability. For a better understanding, we must look into the milestones:

The first milestone: “To initiate a process of dialogue and participation with different actors, including representatives of the indigenous peoples.” This is one of the most important, as it indicates that those who have occupied the land of the lithium salt flats for centuries will have a say in the use of their lands. Lithium mining doesn’t use nearly as much water as the oil companies would want you to believe, but the mineral is usually present in desertic areas, where any water requirements — no matter how low — are poised to have some degree of impact … and those most affected, of course, are the inhabitants of these regions.

The second milestone, perhaps the most important, is: “To create a National Lithium Company.” It is supposed to own no less than 50.1% of any lithium mine in the country, and will participate in “the entire industrial cycle of lithium,” including building and recycling batteries. Once the details come out, this milestone may require an article of its own, but for now, little can be said. It’s clear that Chile wants more than to simply produce raw materials, but it’s also hard to predict what the conditions will be for private companies that wish to participate in lithium extraction in the country. As far as we know, foreign interest in investment in Chile is still high, but that could change if conditions for the mining companies becomes too draconian. Time will tell.

The third, fourth, fifth, seventh, and eighth milestones add little additional information to the NTS. They involve protecting some salt flats, prospecting new ones for lithium production, modernizing the institutional frame, and creating new research institutions for the improvement of lithium extraction and the “productive transformation” of lithium (basically, to build batteries onsite).

Atacama Salt Flat

Those of you paying attention would have noticed by now that I missed the sixth milestone. That’s because this one is different. All the other milestones present either a broad general objective or an institution to be created … but not the sixth, which refers to the “Incorporation of the Chilean State in the production taking place in the Atacama Salt Flat,” currently responsible for 30% of the world’s lithium production. In other words, it wants to modify the status quo in the current lithium-producing mines.

As of today, two companies own shares in the production of this salt flat: SQM (responsible for 75% of Chile’s lithium production) and Albemarle (responsible for the other 25%). The government was clear that the contracts for these two companies were to be respected, but that efforts would be made to renegotiate SQM’s contract (to end in 2030), asking for more public participation in the short term as a bargain for renewing the contract after 2030. Albemarle’s contract expires in 2043 and — it seems — will remain untouched.

Regardless, the Atacama Salt Flat includes only 3 of the 18 locations with lithium reserves found so far in the country (not considering possible reserves on the other 60 or so salt flats), so there’s plenty more to work with.

(Possible) Impacts on Chilean Lithium Production

As we mentioned before, the strategy has just been presented, and the details will have to wait until things get more cooked up. In particular, the draft for the creation of a National Lithium Company (which will provide much more information on the NLS) is to be presented in late 2023.

However, some things we can already conclude.

First, it’s clear that this will not affect current lithium production whatsoever. The two large companies working on Chilean soil will keep their operations ongoing, with little — if any — changes. As Chile’s Mining Minister said, “this is not a nationalization.” It’s possible, however, that this move will deter investment in the short term, providing Argentina with a chance to close the distance and become the world’s second largest lithium producer.

Second, it’s obvious that this will affect future lithium production … to some degree, at least. If salt flats are declared to be conserved areas, then lithium obviously will not be produced there. If the indigenous population demands lower water usage in the areas that are being developed, then new mines may become less productive than they otherwise would’ve been. And yet, if we’re to move to a greener, more sustainable future, aren’t these efforts worth it?

Perhaps. Perhaps not, particularly if this ends up fueling fossil fuels (pun intended) for a few more years. Chile is walking a thin line here, and nobody said mining could ever be done without local impacts. And yet, we really need this lithium, and oil producers rarely get this level of environmental and social requirements when opening new fields. But are we to allow lithium mining to get away with the same things that oil companies have gotten away in the past? Is it even fair to have the same standards for the mining companies that are polluting the atmosphere — risking a climate crisis — and those that aren’t? What do you, fellow readers, think about this?

Third, this opens the door for new actors. Small companies, otherwise excluded from these sorts of deals, now get a chance to participate as minority partners: in particular, the strategy reserves a special place for any company willing to try direct lithium extraction (DLE), which will make Chile a pioneer on techniques that require only a fraction of the water normally used on the evaporation pools.

BYD electric buses in Santiago, Chile. Image courtesy of BYD.

Some analysts are claiming that Chinese companies, used to working with the government, may have an edge in the negotiations to come. However, this will largely depend on how the NLS develops, and how efficient western mining companies are in their negotiations.

At last, Codelco, the Chilean National Copper Company, is going to be sitting in the negotiations with SQM and will get a chance to diversify from copper production — though, it’s likely to lose share to the future National Lithium Company.

The Grand Scheme of Things

Now, don’t get me wrong. As the second largest lithium producer in the world, and the country with the largest reserves, Chile is very important.

However, the rising lithium prices of 2022 and the clear path for a significant increase in lithium demand in the years to come have made many other countries start looking to see if, perhaps, there’s some of the material under their own feet. And so far in 2023, two have come forward with great discoveries: India and Iran. According to reports from these governments, combined reserves stand at more than 14 million tons in both countries (Chile, in contrast, has 9 million tons of known reserves).

This, I bet, will not be an isolated event. As lithium demand grows, more and more countries will start to find new reserves and extract more of the material. And the optimist in me believes that this will make Chile’s decisions be of little impact in the grand scheme of things. One way or another, we will get all the lithium we need for this transition, and we will get it (or get access to it) before the end of the decade.

Featured photo by Diego Jimenez on Unsplash


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Juan Diego Celemín Mojica

Passionate for all things Latin American, I’ve been closely following the energy and mobility transitions since they started to become present south of the equator.

Juan Diego Celemín Mojica has 32 posts and counting. See all posts by Juan Diego Celemín Mojica