Last week, Chile announced plans to bring the country’s vast reserves of lithium under government ownership. The country is the world’s second-largest producer of the key metal used in electric vehicle batteries and is seeking to keep a bigger cut of its mineral riches within its borders.
As the batteries for scooters and cellphones are scaled up to power automobiles and electrical stations, the need for so-called “critical minerals” has surged.
In response, countries with key metal reserves are seeking more government control over the resources, particularly amid the chaos of the United States seeking to reroute global supply chains away from China in a bid to weaken its geopolitical rival’s grip over more than 60% of lithium processing.
Chile would, over time, transfer control of the biggest actively mined lithium reserve on Earth — second only to Bolivia’s in overall size and to Australia’s in total production — from the industrial giants SQM and Albemarle Corporation to a government-owned company modeled on the South American nation’s state copper miner.
In a speech last Thursday, Chile’s new left-wing president, Gabriel Boric — who, at 37, is among the youngest world leaders — directed Codelco, the state copper mining company, to draft a plan for a government-owned lithium company, for which his administration would seek approval from the National Congress later this year.
It’s part of a gambit to overhaul the production of what investors call “white gold.” Cashing in on lithium’s surging price, Chile’s youngest president aims to remake South America’s richest nation into something closer to a Nordic social democracy with a higher perch in lithium’s global value chain.
Boric’s vision charts a future in which Chile would export refined minerals, battery components and maybe even whole electric cars ― and would replace today’s water-intensive method of extracting lithium with emerging technologies that, while untested at scale, promise to use far less.
If successful, Chile would become the third Latin American country to nationalize its lithium reserves and the one with the most advanced and active industry to do so yet. Between 2010 and 2022, worldwide production at lithium mines increased nearly sixfold, and new government subsidies in North America, Europe and East Asia are expected to drive another sixfold spike in the next decade.
“This is the best chance we have at transitioning to a sustainable and developed economy. We can’t afford to waste it,” Boric said in a nationally televised address.
Just last year, Mexico passed a law to give its government a monopoly over lithium mining, nearly two decades after Bolivia’s elected socialists nationalized the Andean nation’s reserves of the flaky, conductive metal.
In a statement from its headquarters in the Chilean capital of Santiago, SQM, whose mining contract expires in 2030, took credit for placing “Chile in a leading position in the most demanding markets in the world” and said it expects “to be part of this dialogue and conversation that now begins.”
As Albemarle’s stock price plunged last Friday, chief executive Kent Masters went on CNBC to assure investors that the government could not take ownership of the North Carolina-based lithium giant’s existing mines in Chile until after current contracts expire in 2043.
Attempting to goad the American executive into attacking Boric, the TV anchor compared Chile to Venezuela, where the socialist government seized control over foreign-owned oil reserves in 2007: “It sounds like this guy is just going to take the mine.”
On the contrary, Masters replied. He said Albemarle was eager to go into business with the Chilean government on new mineral concessions.
“We’ve been talking to the Boric government actually since before they came into power, and they’ve been very thoughtful about this process,” Masters said. “What they’re trying to do is bring more lithium from Chile to the market and do that in public-private partnerships with companies that know how to operate those mines, like ourselves.”
While its value has yet to recover, Albemarle’s stock climbed nearly 5% on Wednesday after Chile state development office Corfo announced that it had held talks with the company.
“Nationalization as a term has shifted from something that used to mean something like expropriation, whether or not a firm was compensated for property that was transferred and taken by the state,” said Thea Riofrancos, a political scientist at Providence College in Rhode Island who studies lithium supply chains. “Now it tends to mean majority equity stakes for the state or divisions of revenues where the state gets 51% or more.”
Boric’s plans are nothing new, and analysts said the possibility of a government takeover had already shifted foreign investment from Chile to neighboring Argentina. While the left-wing government in Buenos Aires has directed its own state-owned energy company to explore lithium mining, the administration publicly ruled out nationalization in 2021.
“New investment in the country has already been limited for some time based on previous discussion of nationalization, and as such, much of the investment in South America has been focused in Argentina,” said Caspar Rawles, the chief data officer at the London-based Benchmark Mineral Intelligence, a research firm that focuses on battery metals. “I think it’s too early to say that the announcement has or will impact prices, we really need to understand exactly what ‘nationalization’ will look like before any firm conclusions can be drawn.”
HuffPost contacted the world’s top 10 lithium mining companies this week to ask how, if at all, Chile’s nationalization plan would affect business. Vancouver-based Lithium Americas, which is vying to open the U.S.’s largest lithium mine in Nevada, responded to say its projects south of the border are located in northern Argentina.
Argentina, Bolivia and Chile together make up what’s called the “lithium triangle,” containing over 54% of the 98 million metric tons of the metal identified in reserves worldwide.
Bolivia’s 21-million-metric-ton share is roughly twice that of Chile’s. But 15 years after Bolivia nationalized the industry — and nearly four years after right-wing lawmakers briefly ousted the socialist president from office in what many speculated was a coup for control of the lithium — the country is only now starting to develop its resource and build out an electric vehicle industry.
The Bolivian state invested about $800 million into building a grid of ponds to carry out the same kind of water-intensive method of extraction popular in Chile. President Luis Arce, whose socialist party returned to power a year after the 2019 political crisis, said a processing plant currently under construction will produce 15,000 metric tons of lithium carbonate per year starting this year, The Guardian reported.
“Today begins the era of industrialization of Bolivian lithium,” Arce said in a speech announcing the plan.
“There’s no time to lose,” he added.
At a summit of the Community of Latin American and Caribbean States in Buenos Aires last July, Argentina, Bolivia and Chile opened talks about forming what they called the “lithium OPEC.” The group was looking at whether it could leverage its control over lithium supplies to emulate how the Organization of the Petroleum Exporting Countries, whose 13 members include Iraq, Saudi Arabia and Venezuela, leverages oil production for geopolitical influence.
But Bolivia’s industry remains so underdeveloped, the country ranked last on the energy consultancy BloombergNEF’s latest list of 30 nations in the battery supply chain. The forecast of what each country’s battery-making capacity would look like between now and 2027 placed Argentina 23rd. Chile fell into the 16th slot. The top three spots went to China, Canada and the U.S.
Earlier this year, Brazil’s left-wing president, Luiz Inácio Lula da Silva, joined the “lithium OPEC” negotiations. But lithium mining is at an early stage in South America’s largest economy, which BloombergNEF ranked just two slots above Argentina. And either way, these countries “don’t corner the market” on lithium, said Seaver Wang, a researcher who studies supply chains for low-carbon technologies at the Breakthrough Institute, an energy think tank in California.
“An OPEC of lithium? I’m very skeptical because these countries wouldn’t have the ability to act like a cartel and dictate the price,” Wang said. “There’s Australia. The U.S. is going to be a major producer. Even the U.K. and Portugal have lithium. India wants to get in on this. China is the major producer.”
“An OPEC of lithium? I’m very skeptical because these countries wouldn’t have the ability to act like a cartel and dictate the price.”
Chile was among the first four countries to join the now-defunct Intergovernmental Council of Countries Exporters of Copper in 1967 but ultimately abandoned its attempt at an OPEC for copper.
Wang said Mexico could have an easier time getting into the lithium game than Bolivia. The state-owned energy giant Petróleos Mexicanos, known by its nickname Pemex, is the second-largest company by revenue in Latin America.
“Mexico has a lot more state capacity and a lot more experience with state-owned industry, so I would think they’d be more successful than Bolivia at moving forward with their development vision for lithium,” Wang said.
The effort could still prove messy in the near term.
Just one private mining company — a subsidiary of China’s Ganfeng Lithium Limited, the world’s No. 1 commercial producer of the metal — was anywhere close to extracting lithium in Mexico. In February, Mexican President Andrés Manuel López Obrador signed a decree banning private lithium mining in a 900-square mile swath of the northwestern state of Sonora, an impoverished area where the company, Bacanora Lithium, owns 10 concessions and had planned to churn out 35,000 metric tons of the metal per year.
Bacanora’s fate remains unclear. On one hand, López Obrador said existing concessions would “remain safe” under his decree. But Fernando Quesada, a lawyer with extensive experience working on extractive projects in Mexico, told Reuters that the government may be setting the stage to use the power of expropriation to seize the mine.
Ganfeng did not respond to a request for comment.
Seizing ownership over mineral reserves is only one way for governments to exercise control over geopolitically sensitive exports. In December, Zimbabwe banned exports of lithium ore, effectively halting production at small mines owned by private foreign firms. Between 2009 and 2019, the Indonesian government phased out exports of nickel ore, requiring that the key metal for batteries be processed domestically before shipping to factories in China, the U.S. or Europe.
“In this moment of geopolitical realignment and the challenges for the Global South, you’re getting this return to the international economic thinking of the 1960s and 1970s,” said Riofrancos, who in January co-authored a study on how the U.S. and other rich countries can reduce lithium demand with more public transit and recycling.
The Chilean government’s plan for the industry could have one major impact early on: spurring the growth of a new and relatively untested extraction method. The proposal calls for phasing out the Chilean industry’s use of a process called brining, which involves collecting lithium from evaporated pools in the desert.
In its place, Boric wants the industry to use “direct lithium extraction.” The suite of technologies using filters, membranes and ceramic beads to extract the metal from salty brines in Chile’s Atacama Desert is expected to use far less water, addressing one of the main reasons locals living near mines oppose the facilities.
“The devil is in the details,” Chris Berry, an independent lithium industry consultant, told Reuters of Boric’s plan. “But it’s a great opportunity for technological innovation of brine processing, either way.”