Within the huge, nearly haunting expanse of the excessive Argentine desert, beneath layers of brine and time, lies a component that might simply be mistaken for desk salt. But, this mineral holds the important thing to energy electrical autos, 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 subsequent 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 the US and China compete globally, Western corporations are searching for 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 vital 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 corporations like Ganfeng, Tianqi, and Zijin have gained partial or majority management over vital mineral mines world wide. Examples embody CMOC’s 80 % stake within the largest cobalt mine within the Democratic Republic of Congo, and Chinese language corporations’ large funding in Indonesia’s nickel trade. Lithium is not any exception; Chinese language corporations 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 corporations,” daredevil entities that tackle the dangers of uncovering nature’s buried treasures. Usually birthed within the mining cradles of Canada and Australia and nursed on their respective inventory exchanges, these junior miners are all the time thirsty for capital. And Chinese language financiers had been all too glad to step in when Western buyers had been busy swooning over the most recent tech ventures.
A 3rd technique is to enter into joint ventures with Western and native corporations. In Australia, Tianqi has a 51 % stake in Greenbushes, the most important lithium mine on the 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 almost 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 seeking to improve that stake. Chinese language electrical automotive maker BYD is engaged on a $290 million lithium cathode battery manufacturing manufacturing facility 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 just lately purchased native Lithea Inc from Argentine oil firm PlusPetrol for $962 million. Zijin is presently 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 automotive manufacturing facility in Jujuy province.
And in Bolivia, Chinese language consortium CATL received 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 similar 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 susceptible Western international locations’ provide chains had been to China. Since then, U.S. policymakers, together with counterparts in associate international locations, have been attempting to “decouple” or “de-risk” key provide chains from China. Now, for a number of personal corporations, collaborating with Chinese language counterparts in industries very important to nationwide safety has develop into akin to enjoying with hearth.
Canada is a living proof. On July 31, 2023, Lithium Americas determined to separate its North American and Argentine operations, more than likely to protect 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 corporations, which included a Canadian-run lithium mining undertaking in Chile. It’s a part of the Funding Canada Act, which is able to assessment international investments in delicate industries, just like the Committee on Overseas Funding in the US.
In the meantime, Australia is searching for to interrupt its dependence on China by boosting its personal home capability to refine lithium spodumene into lithium phosphate salt to promote on to the US and different clients. 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.
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, the US, Canada, and Australia, these different U.S. allies appear to be lacking in motion.
Presently the one European carmaker linked 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, however, is an enigma. Japan, with its automotive prowess and deep-seated ties with international locations like Brazil and Peru, stays conspicuously absent. A decade in the past, Toyota Tsusho entered right into a lithium sourcing settlement with two Argentine corporations 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 Affiliation for Provide 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 inside the Hombre Muerto salt lake, and introduced a $4 billion funding 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 international locations’ 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 permit their Chinese language opponents to leapfrog them within the EV transition.
China, which merely many years in the past was a novice within the car enviornment, now stands shoulder to shoulder with the giants. Their ace? Management over 90 % of the lithium refining capability, a strategic benefit that might go away Japan, South Korea, and European opponents 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 may be already a serious push by native governments to have corporations maintain the refining, processing, and battery manufacturing inside their international locations. In its latest nationwide lithium technique, Chile acknowledged it desires to domestically refine and course of lithium to supply jobs and worth to the Chilean individuals. As Chinese language carmakers construct battery factories in South America, evidently Chinese language corporations 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 corporations are on the horizon. GM and Ford have already made their strikes, and it received’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 the US, geologists just lately found lithium deposits alongside the Nevada-Oregon border – probably among the many world’s largest. The Salton Lake in southern California, dubbed the “Lithium Valley,” in addition to Nevada’s Thacker Go, beckon with promise. In India’s Himalayan foothills, an unlimited reserve of spodumene lithium has been found, although the shadow of Kashmir’s battle looms giant and should make entry to this treasure as elusive because the peace that may 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 may 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 won’t solely draw beneficial properties from the US and China but additionally elevate the lives of their citizenry.
Conclusion: The Finish of the China-West Lithium Tango?
Within the theater of worldwide commerce and politics, the notion of “decoupling” typically 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 additionally derailing the worldwide inexperienced transition.
If the mantra is to be one among unrelenting rivalry, then the West must set its sights on South America’s lithium bounty and purpose to outcompete China.
First, the US, allies, and companions must formally embody Argentina and Chile within the State Division’s Mineral Safety Partnership, a gaggle that ensures vital minerals are produced, processed, and recycled with the best high quality requirements. Doing so will ship a powerful message of South America’s significance within the lithium international provide chain.
Second, U.S. policymakers want to supply incentives for U.S. corporations to be extra energetic in Argentina and Chile. The U.S. ought to embody Argentina as one of many international locations that qualifies for particular advantages below the Inflation Discount Act. Proper now the IRA supplies EV tax credit solely to automobiles whose batteries and minerals had been produced inside the U.S. or a rustic with which the U.S. has a free commerce settlement. Chile presently counts as a result of it’s an FTA associate; Argentina, regardless of its giant lithium reserves, is excluded as a result of it doesn’t have an FTA with the US.
The U.S. also needs to think about increasing the Protection Manufacturing Act – which permits the president to direct personal corporations 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 international locations.
Third, U.S. corporations also needs to think about growing deeper relationships not solely with the Argentine central authorities, but additionally the provincial governments of Jujuy, Salta, and Catamarca. In Argentina’s federated system, the provinces have full jurisdiction over their lithium sources. Chinese language corporations have lengthy understood this and have made a concerted effort to ingratiate themselves with provincial leaders. U.S. and Western corporations ought to do the identical, whereas refraining from partaking in corruption. The prospect of working with Bolivia is sort of low because of the Arce administration’s elevated relations with China and Russia. Nevertheless, the US ought to search for home windows of alternative to have interaction the Bolivian authorities sooner or later.
Fourth, the U.S., allies and companions shouldn’t put self-imposed limits on lithium exploration and manufacturing. Washington’s gaze, each geographically and when it comes to funding phases, is woefully slender. All the U.S. authorities’s investments are centered domestically, which is sensible politically, however doesn’t take into consideration the worldwide nature of the lithium provide chain.
The U.S. technique can be restricted by its life cycle. Presently, U.S. government-supported abroad financing can not go into early stage mineral exploration. Nevertheless, corporations are nonetheless attempting 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 by 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 spend money on lithium mining initiatives. On the August 18, 2023 Japan-South Korea-U.S. summit at Camp David, the U.S. Growth Finance Company, Japan Financial institution of Worldwide Cooperation, and South Korea’s Export-Import Financial institution agreed to cooperate on financing infrastructure, info expertise, provide chain resilience, and local weather initiatives within the Indo-Pacific and past. Certainly one of their first initiatives outdoors the Indo-Pacific needs to be investing in a South American lithium mining undertaking. Such investments shouldn’t solely embody the mines themselves however the infrastructure round them too – together with roads, procurement companies, and expertise suppliers.
The street to lithium dominance is strewn with challenges – distant locales, daunting altitudes, and treacherous terrains. However it’s this very adversity that provides the West, alongside its allies and companions, a golden alternative to take a position, innovate, and illuminate the lives of thousands and thousands.
Ultimately, the South American lithium saga is not only about powering smooth Teslas. It’s a few imaginative and prescient, a promise – of prosperity, progress, and a brighter tomorrow for the individuals of Argentina, Bolivia, and Chile.