Author(s)
Chile’s Lithium Production
Chile possesses the world’s largest lithium reserves; however, the country’s current legal and regulatory framework has hindered its ability to sustain its former position as the leading producer of lithium.
Chile is currently navigating the complexities of boosting lithium production, a task complicated by a stringent legal framework established in 1979. This law mandates that lithium reserves are state-owned for national interests and cannot be granted as mining concessions. It allows for exploration, extraction, and processing either by state entities or through administrative concessions or special lithium operation contracts (CEOLs), subject to specific requirements and conditions set by presidential decree.
Chile has been able to produce more lithium year over year (Figure 1). However, it has not been able to do so at a pace fast enough to capture more of the global market share. Chile’s global market share has remained flat at 25% over the past five years (Figure 2). Thus, the government is now working on a new framework to attract additional participants.
Figure 1 — Lithium Production by Tonnes (Metric Tons), 2011–23
Figure 2 — Lithium Production by Percentage of World Total, 2011–23
All lithium production in Chile is concentrated at the Salar de Atacama, the largest salt flat in the world. However, only two companies, Sociedad Química y Minera (SQM) and Albemarle, secured administrative concessions from the Chilean Economic Development Agency (Corporación de Fomento de la Producción, CORFO), which is currently responsible for managing these properties. Their contracts are scheduled to expire in 2030 and 2043, respectively. The National Copper Corporation of Chile (Codelco) and SQM already signed an agreement after direct negotiations that the state-owned company will own 50% of the shares plus one and extend the contract to 2060.
Chile’s National Lithium Strategy
The current government, acknowledging lithium’s critical role in the global energy transition, launched the National Lithium Strategy on April 20, 2023. Its goals include sustainable exploration and extraction, social and environmental responsibility, technological and value chain development, and involvement from public and private sectors.
The National Lithium Strategy also establishes new government entities tasked with implementing these goals through specific actions. In addition, it listed 69 salt flats in the country and defines areas that will be protected and/or reserved for the state and not subject to request for information (RFI). On April 15, 2024, a process began to determine how to select private contractors for CEOLs, while prioritizing salt flats. The primary objective of the RFI was to learn about the interest of national and international companies in the execution of projects related to the exploration, exploitation, and benefit of lithium contained in salt flats in order to design a competitive granting process.
The RFI closed on June 17, 2024, and the participating companies expressed interest in specific lithium deposits, proposed technological developments, and demonstrated operational and financial capabilities. The government received 88 expressions of interest from 54 companies across 10 countries.
On July 9, 2024, the Mining and Finance Ministers as well as CORFO announced that they were pleased with the results of the RFI call. In particular, they highlighted that 53 requests were for specific 16 salt flats and that more than 80% of the projects indicated the use of direct lithium extraction technologies, which would maximize the lithium recovery from brine. The finance minister concluded that they may exceed their original goal to add three or four additional projects before the end of 2026.
Lithium Global Market
At this time, lithium is facing a slump in prices after having had a healthier period in 2022–23. These higher prices in 2022–23 made lithium projects economically attractive, increasing their supply in Chile and worldwide. On the demand side, the major driver is the manufacturing of batteries for electric vehicles (EVs). Given the fact that EVs demand has slowed down worldwide, the expected demand growth for lithium has dropped as well, and a lithium glut has been generated.
What are the chances that the rate of global EV demand growth will accelerate, and when might this happen? Furthermore, in Chile, will the new round of concessions and increased regulatory requirements result in a swift or gradual rise in lithium production, in addition to potential legal challenges?
References
“Mining,” InvestChile, https://www.investchile.gob.cl/key-industries/mining/.
Ministry of Mining, Government of Chile, https://www.minmineria.cl/.
National Lithium Strategy, Government of Chile, https://www.gob.cl/chileavanzaconlitio/.
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