white sand

Chilean President Gabriel Boric announced intentions earlier this month for the state to take a majority share in the country’s lithium industry, sending shockwaves through the new energy metals sector.

According to the idea, a state-run lithium firm will be established to assume control of the industry from private actors, and any new lithium contracts will only be awarded as public-private partnerships under state management. Notably, existing contracts will not be cancelled.

In a nationally televised address, Boric stated: “We want Chile to become the top producer of lithium while preserving the salt flats’ biodiversity… This is our best opportunity to move towards a developed and sustainable economy.

The South American nation possesses the highest reserves and is currently the second-largest producer of lithium in the world. Given that lithium is currently one of the most sought-after metals on Earth, Boric’s choice is likely to have an impact on the entire world. The metal, which is also known as “white gold,” is used in rechargeable batteries that power electric cars (EVs), which are an essential component of the global effort to combat climate change. EVs can also power computers, mobile phones, and other devices.

Chile has had difficulty keeping up with the increased demand for lithium as nations switch to renewable energy sources in recent years. According to a recent JPMorgan research, it is likely to fall to third place by 2028 after falling to second place on the list of the largest lithium producers in the world in 2017 as Australia moved to the top spot. Analysts therefore anticipated the president to devise a strategy.

According to Al Jazeera, Boric stated his desire to establish a state-run lithium firm that would “promote, expand, and control” the lithium sector. The new business will be structured similarly to Chilean government-owned mining giant Codelco, which is currently the top copper producer in the world.

Codelco was established five years after former socialist President Salvador Allende nationalised Chile’s copper industry in 1971, and it has long been a sizable contributor to the country’s GDP. According to Reuters, the company’s pre-tax profit increased to $7.6 billion in 2021 from $2.1 billion the previous year. Boric wants to continue Codelco’s illustrious tradition by advancing the lithium sector.

The president also expects that his strategy would lessen environmental harm. Local indigenous communities and environmentalists have sharply condemned the brine evaporation process used in present production since it uses a significant quantity of water, which is already scarce, particularly in the Atacama Desert, where the majority of the lithium reserves are found.

A 2022 study indicated that lithium mining has also harmed Chile’s ecology, causing a drop in the area’s flamingo population. According to Reuters, fewer flamingos are reproducing as water becomes more limited in the Atacama, which may have an effect on herd sizes.

Future mining ventures, according to Boric, will be put into action following community consultation. These salt flats are not merely a source of lithium; they are also communities of people and a source of water in the desert. They house cultures that date back thousands of years, he said.

The two largest lithium producers in the nation at the moment are the American corporation Albemarle and the local company SQM, whose contracts expire in 2030 and 2043, respectively. As was already established, Boric has pledged to uphold current contracts, but any future agreements must include the state as a partner.

The president also hopes that the government and the businesses can work out a way to increase state involvement in their operations before the contracts with SQM and Albemarle expire. Albemarle stated that it would only talk about state participation when its contract was close to expire, in contrast to SQM, which earlier this week indicated that it was prepared to begin negotiations with the government shortly.

The announcement made by Boric has been referred to by certain newspapers and analysts as the “nationalisation” of the lithium business. The Al Jazeera report highlighted that many have nevertheless remarked that lithium is already defined in Chile’s constitution as a strategic and solely state-owned mineral due to its potential use in nuclear fusion.

The term “nationalisation” is used too strongly. According to Nicolás Saldas, senior analyst at the Economist Intelligence Unit for Latin America and the Caribbean, it’s a quasi-nationalization in that the state will now have an advantage on the playing field.

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