Lithium Industry of Chile

Lithium Industry of Chile

Subject :Geography

Section: Economic geography

News in Brief

• Chile Government plans to take a majority stake in the country’s lithium industry.
• A state-run lithium company will be set up to take control from private players.
• Any new lithium contracts will only be issued as public-private partnerships with state control.
• The two current contracts will not be terminated. They are with two big lithium producers, the local company SQM (till 2030) and the United States-based Albemarle (till 2043). Government may also try to boost state participation in the operations of these companies.
• Some experts call this as “nationalization” of Lithium industry. Some call it quasi-nationalization with playing field being levelled in favour of the state.

About Chile

• It is a South American Country
• It has the world’s second-biggest producer of lithiumand has the largest reserves
• Chile’s constitution defines lithium as a strategic and exclusively state-owned mineral, because of its possible use in nuclear fusion.

About Lithium

• Referred to as “white gold”
• Used in rechargeable batteries that power laptops, mobile phones
• Used in rechargeable batteries to power electric vehicles (EVs), which is a crucial part of the world’s plan to tackle climate change.

Why Chilean Government wants Majority stake in Lithium Industry?

To boost Chile’s economy

• As countries transit to green energy, demand for lithium rise.
• Chile struggles to keep up with the demand and fell to the 2^nd position in the list of largest lithium producers, taken over by Australia.
• State-run lithium company will “promote, expand and control” the lithium industry and prevent Chile from falling to the 3^rd position in 2028 (as predicted by JPMorgan)
• Chilean President wants to set up the lithium company on the lines of Codelco, a Chilean government-owned mining company which is now the world’s largest copper producer.

To protect Chile’s Environment

• The brine evaporation method used in current production consumes vast amounts of water.
• Water is already scarce especially in the Atacama Desert – most of the lithium reserves are located.
• Widely criticized by local indigenous groups and environmentalists
• Lithium (Li) mining has damaged Chile’s biodiversity – a 2022 study – Li Mining led to decline in the number of flamingos in the area. Water becoming scarce in Atacama, fewer flamingos are reproducing, impacting herd numbers
• Future mining projects to involve consultation with local communities to protect the salt flats

Brine Evaporation Method

Lithium brine recovery is a straightforward but time-consuming process. Salt-rich water is pumped to the surface and into a series of evaporation ponds. Over a period of months, the water slowly evaporates and a variety of salts precipitate out, leaving a brine with an ever-increasing concentration of lithium.

Salt Flats

• A salt flat is a natural landscape in which a large area of flat land is covered by salt.
• World’s most well-known salt flat is the Salar de Uyuni in Bolivia – largest in the world and also contains more than half of the planet’s lithium reserves.
• A salt flat forms from a natural water body whose recharge rate is lower than the evaporation rate.
• Over time, all the water evaporates, leaving behind the dissolved minerals, usually salts. They reflect sunlight strongly and thus appear bright.
• The underlying soil is highly saline — even if the water table is shallow. The groundwater is too salty for humans to drink.

Salt Flats of Chile

Atacama Salt Flat is the biggest salt deposit in Chile. It has a rough white surface below which there is a large Salt Lake. It is surrounded by mountains, and has no drainage outlets. In the east it is enclosed by the main chain of the Andes, while to the west lies a secondary mountain range of the Andes called Cordillera de Domeyko. The lake under the salt flat has one of the largest lithium reserves in the world.

Challenges Involved

• Getting it approved by Congress, where the President’s party doesn’t have a majority, and would need the support of Opposition parties
• Creation of a state-run lithium company could take years for the government.
• Codelco could take years to implement the proposal as it doesn’t have any experience in lithium mining.
• National elections in 2025 could also impact the negotiations between the private players and the government.