This article is part of a special report on the Lithium Triangle. You can read the other two parts here and here.
The Lithium Triangle, a region of South America comprising Argentina, Chile and Bolivia, has proven potential in lithium production, but each country faces its own specific challenges.
These include poor infrastructure, remoteness, impurities in output, and government intervention. These must all be overcome for the projects to succeed in the near future, industry specialists have told Fastmarkets.
The region is expected to gain more importance in lithium production in the coming years, because it has vast resources and offers low-cost operations.
Fastmarkets’ research team notes that, in 2023, 94% of global lithium supply came from just four countries: Australia, Chile, Argentina and China.
But supply is diversifying, so in 2034, the forecast is that Eastern Asia (China) will be the largest single producer globally, accounting for 30% of supply, followed by South America with 28% and Australia and New Zealand with 25%.
By 2034, Fastmarkets expects 61% of processing to be in China, 21% in South America, 5% in North America, 6% in Europe, 3% in Australia and 3% in other parts of the world. Ex-China processed production will increase at a compound annual growth rate (CAGR) of 13% to 1.02 million tonnes of lithium carbonate equivalent (LCE) in 2034, compared with 298,000 tonnes of LCE in 2023.
But on the way to reaching this level of importance in mine and processed supply, South America still must find solutions for its problems.
Eduargo Gigante, a lithium and battery market consultant for the region, told Fastmarkets that the lithium resources in the triangle are very specific and require different approaches in each country.
“Bolivia is the worst, with a very long history of problems, and it will not be a main participant in the market,” he said. “The approach, the government and the poor framework of resources in Bolivia are really bad. The state controls the entire value chain. Bolivia will not have a great future in the near term. We can hope for better prospects in perhaps 5-10 years’ time.”
“Chile is better than Bolivia, but it also has a problem with the framework,” Gigante added. “With the new lithium national strategy and the new state management… we are not sure what will happen.”
“On the other hand, Argentina is better positioned,” he said. “Its lithium production will grow very strongly in the next 2-3 years. The country has a better approach to the legal framework, it’s very open to investment, and the new government is very attached to the mining sector. And we have RIGI.”
Argentina recently introduced its new RIGI incentive regime for large investments, which provides financial leverage for various sectors – including mining – as well as tax, customs, Forex and regulatory stability for 30 years.
The RIGI scheme offers several tax benefits, such as a reduced income tax rate of 25%, faster amortization periods, and the ability to carry forward losses without restrictions.
Projects with investments worth $200 million or more can benefit from the RIGI scheme, but companies are required to spend 20% of their investment locally, ensuring that the benefits of mining are felt within the country.
The fact that Argentina is better positioned, while Bolívia and Chile have bigger challenges to overcome, dominated the sideline conversations at the Litio en Sudamérica conference held in Jujuy, Argentina, in October. More than 1,500 participants across the value chain discussed the future of production in the region.
Jason Luo, chief executive officer and president of Ganfeng Argentina, told delegates in his presentation that RIGI is creating a new scenario that adds value to the industry.
“It is crucial to have long-term solutions,” Luo said. “We only undertake projects that we consider necessary to strengthen the industry. This means increasing production and creating more jobs through close collaboration with our suppliers.”
Ganfeng is pursuing activities in Argentina, specifically in the provinces of Salta and Jujuy, where it is running five lithium projects. These are the Mariana Project; Pozuelos-Pastos Grandes; the Cauchari-Olaroz Project; the Incahuasi Project; and the Sal de la Puna project.
Many market participants told Fastmarkets on the conference sidelines that RIGI favors and provides legal security for lithium projects, bringing more investment to Argentina.
“Argentina is the best positioned country in South America, with low costs and good government policies, such as RIGI. Bolivia, on the other hand, is a disaster. There are no rules. All the plants are government-owned and the government wants to take over everything. In Chile, there are also many restrictions because of the government,” a source that is developing a project in the Lithium Triangle said.
“Argentina is the best positioned in South America,” a second producer source said. “Bolivia produces little and its lithium is of low quality, because it has a lot of impurities. Chile also has government involvement.”
And according to a third producer source, the market must understand that the triangle is a hybrid region, so some projects have better competitive advantages than others.
Also, salt flats differ in their levels of lithium concentration. “The market will become more demanding and will select the best, low-cost projects, and this could be an advantage for Argentina. There are many projects that will not go ahead in South America, but some have a competitive advantage in Argentina,” the third producer source said.
“I don’t know how quickly Bolivia can adjust to a new scenario,” a fourth source said. “It’s not market-driven market, it’s institutionalized. They have the material, but politics is a problem there.”
Another market participant told Fastmarkets that they saw great investment opportunities in Chile, which is the longest standing lithium-producing country in the world, but was disappointed by the level of government intervention.
In April 2023, the Chilean government announced that it intended to nationalize its lithium resources under the “National Strategy for Lithium.”
The goal would be to establish a state-owned company, National Lithium, to oversee the entire production cycle of the critical mineral.
According to the UN Trade and Development (UNCTAD) website, the country’s existing state-owned copper companies, Codelco and ENAMI, will play leading roles in this endeavor. The state will retain a majority stake in projects deemed strategic for the country.
Some market participants saw this nationalization plan as having the potential to impede further foreign investment into production in the region.
Lithium-ion battery supply chain consultant Jose Hofer told Fastmarkets that Chile has wonderful resources of lithium, but faces a lack of human capital and government intelligence.
“Chile has significant production, but the future capacity will take 8-10 years to expand,” Hofer said. “This is not what we see in Argentina, for example, where production will quintuple in 10 years. The current Chilean government is radical left-wing, and is pushing for the state to have control.”
One of the main points of the new national strategy is that companies that want to invest in the country must now adopt direct lithium extraction (DLE)-based processes to partner with the Chilean government, because the country is focusing on the adoption of new lithium extraction technologies that minimize their environmental consequences.
Gigante believes that the Chilean government’s decision regarding mandatory DLE is a big mistake.
“I don’t know any company in the world that is working on an industrial scale for DLE,” he said. “Traditional evaporation is a better option, not expensive, very productive, and friendly to the environment. In Chile, there are no new projects, and if you start a project, you’ll need maybe 7-10 years to develop a DLE project.”
For Hofer, it was important to note that DLE uses more fresh water and interferes in the chemical balance of what is below the salt flat. “Besides,” he added, “many of these technologies have not been proven to be commercially feasible.”
According to Fastmarkets’ research team, unconventional resources are necessary to offset the supply/demand deficit forecast for the future, while also promising higher recovery rates and better environmental-social-governance (ESG) credentials, although the technology is costly compared with conventional recovery methods.
There are five DLE technologies, which are not new, according to Fastmarkets’ research team.
“Livent has been using absorbent DLE technology for 26 years,” they said, “but all the absorbent technologies are at pre-commercial stages, so it’s possible to see potential delays to projects using DLE. The commonality across all five is the promise to increase recovery, cut costs, reduce production times and improve the ESG footprint of lithium production, compared with traditional methods.
“Whether these technologies will scale-up has yet to be proven,” they added. “If successful, DLE has the potential to unlock 25 million tonnes of LCE in unconventional resources, while simultaneously lowering the environmental footprint of traditional salar brine resources.”
Argentina stands out for many reasons and for receiving a lot of private capital, with a high percentage of salt flats in foreign hands. But despite being considered to be in a better position, market participants noted that the country must face its challenges and many projects will be delayed.
“Ramp-ups in Argentina are very underestimated. Although we have the plants, ramping up and achieving full capacity will take more time,” a producer source said, adding the low prices are affecting the development of projects in the country.
According to Gigante, the biggest problem in Argentina is infrastructure. The mines are in very isolated locations, and the roads to get there are poor.
“We don’t have very good ports, and they are far away from the Triangle,” he said. “Catamarca, Salta and Jujuy are the poorest areas and are where the lithium is concentrated in Argentina. We don’t have trains in Argentina – all the production is going on trucks. This is a problem, because the logistics cost is high. I don’t know if the roads are ready to respond to this lithium growth in Argentina. It might be a problem.”
Luo also said in his speech at the Litio en Sudamérica event that Argentina faces problems with logistics, value chain and infrastructure. The Mariana project, he said, “is very ambitious and is located in a remote location, without access to natural gas or electricity. Therefore, we are building one of the largest off-grid solar plants, designed to supply our entire chemical plant.”
Hofer said that logistics were a problem in the Lithium Triangle, mainly in Argentina, where output must cross the Andes region to get to Chilean ports. “The country with the greatest advantage in this regard is Chile, because it has the main important ports in its territory,” he said.
The main Chilean ports are Antofagasta, Angamos and Mejillones.
Fastmarkets assessed the lithium hydroxide monohydrate LiOH.H2O 56.5% LiOH min, battery grade, spot price, cif China, Japan & Korea, at $8.50-10.00 per kg on Thursday November 21, up by 5.71% from $8.00-9.50 per kg the previous day.
Fastmarkets assessed the lithium carbonate 99.5% Li2CO3 min, battery grade, spot prices, cif China, Japan & Korea, stable on Thursday at $10.80-11.40 per kg, unchanged since Tuesday.
This article is part of a special report on the Lithium Triangle. You can read the other two parts here and here.
The post The Lithium Triangle: A potential giant but with challenges to overcome appeared first on Fastmarkets.
