The OPEC shook the world and started a new dimension of geopolitical rivalry, can lithium remake this landscape once again?
Published Date – 12:30 AM, Sun – 30 April 23
By Amitava Mukherjee
Hyderabad: The possibility of a lithium cartel is now a reality. Though a section of the Western mining giants is prone to dismiss this possibility, prudent minds should be wary of such a spectre as the future energy and environmental scenario would depend on easy and unrestricted availability of lithium for a switch over from hydrocarbons to green energy.
Some western business behemoths, however, think that lithium supply is abundant and, therefore, forming any cartel over its production and supply would not work. Here comes a caveat. Fossil fuels were also abundant when the OPEC (Organization of the Petroleum Exporting Countries) effected a steep rise in oil prices in 1973 along with production cuts and oil embargos. At that time crude oil was not concentrated in West Asia and some North African countries only. The then Soviet Union had a large concentration of oil, not to speak of the US and some Central American countries. Still, the OPEC decision shook the whole world and started a new dimension of geopolitical rivalry. Moreover, abundant is a relative expression. Lithium may be abundant today, but sometime later it may become scarce.
Big business honchos are taking comfort from the fact that lithium prices are falling in China, one of the notable producers of the material and also the largest producer of electric vehicles — an area of the business whose turnover hovers around $87 billion. The fall in prices coincided with a fall in production as news trickled out that Beijing was mulling withdrawing subsidies to the sector.
- The International Energy Agency forecasts that lithium production, currently around 1,00,000 tonnes annually, will need to increase over 40-foldto put the world on a path to net-zero CO2 emissions by 2070
Both production and sales came down drastically at the beginning of 2023 from what they had been in December 2022. But it does not prove that there will not be any rush for lithium in future. On the contrary, the use of lithium ion-made batteries is likely to find applications in newer fields. And such areas are many.
Lithium Cartel
South America holds about 75% of the world’s lithium reserves with Argentina, Chile and Bolivia having 65% of the earth’s total deposits. These three countries are called the ‘Lithium triangle’. Governmental representatives of these three countries meet at intervals for shaping a lithium cartel. Brazil is expected to join them. Bolivia has the largest deposit — 21 million tonnes, closely followed by Argentina with Chile being the third.
Other countries with significant reserves are the United States and Australia. China trails Australia by a significant margin but has made most of its reserves as it has a fledgling electric vehicle-producing industry. However, only the Latin American countries are in a position to form a cartel due to their large volume of deposits.
Bottlenecks for Cartel
For launching an OPEC-like cartel, the Latin American countries must follow a uniform approach, which is missing. Different political outlooks are standing in the way. Argentina follows a liberal policy with little state intervention and is ready to hand over mining rights to private players. But Bolivia, Chile and Mexico are witnessing lithium nationalism. Mexico has banned private players while in Chile there are growing demands for creating a state-sector company for mining lithium.
The recent victory of Left-wing politicians in different countries of Latin America enhances the prospect of a cartel as it may be viewed by Left-leaning politicians as a handy tool for putting up a counterweight against the West-dominated international balance of power.
- Nearly 80% of known deposits are in four countries – the South American lithium triangle of Argentina, Bolivia and Chile, and Australia
Meanwhile, clean energy technologies will continue to elbow out their fossil fuel-based brethren and to meet the demands of the former, by 2050 production of critical minerals like lithium and cobalt would have to be raised by 500% over what it is today.
(The author is a senior journalist and commentator)
Lithium Triangle
Bolivia: Raw Materials or Sacred Beings?
Located in the heart of South America, Bolivia contains the largest lithium deposits in the world — an enviable position, in many countries’ eyes, as the market for electric vehicles takes off. But unlike its neighbours Chile and Argentina, Bolivia is yet to become a major player in the global lithium market. In part, this is because its high-altitude salt flats aren’t suited to the usual extraction methods, solar evaporation.
But that looks poised to change. In January 2023, state company YLB signed an agreement with the Chinese consortium CBC, which includes the world’s largest producer of lithium-ion batteries, to introduce a new method called direct lithium extraction. It may prove an economic boon. But since colonial times, the legacy of mineral abundance in Bolivia has also been one of pollution, poverty and exploitation. Direct lithium extraction demands a great deal of fresh water, potentially endangering surrounding ecosystems as has happened in other parts of South America’s ‘lithium triangle.’
- With less than 7% of the world’s lithium reserves, China is the world’s largest importer, refiner and consumer of lithium, buying 70% of lithium compounds and supplying 70% of lithium production, largely to domestic lithium battery makers, six of which are among the top ten in the world
A rapid escalation of lithium extraction in the Bolivian Andes also represents a looming clash between two fundamentally different views of nature: modern industrial society’s and that of indigenous communities. Bolivia is home to 36 ethnic groups across its highland and lowland regions. For these cultures, nature is not a means to human ends. Instead, it is seen as a group of beings with personhood, history and power beyond human reach.
Bolivia’s extraction initiatives have faced severe setbacks in the last few years, including social protests, the 2019 political crisis and a lack of necessary technology. The Chinese deal represents a new milestone, yet its outcomes are uncertain: for the economy, local communities and Earth.
Today, electric vehicles are widely considered part of the solution to the climate crisis. Yet they will necessitate a mining surge to meet their battery demands. If societies really want a greener future, technological shifts such as EVs will be just part of the answer, alongside other changes like more sustainable urban planning and improved public transportation.
Chile’s partnership deal
Chile has the world’s third largest lithium reserves, at 9.6 million tonnes, behind Bolivia with 21 million and Argentina with 19.3 million.
President Gabriel Boric has announced a plan to require that private companies take Chile’s government on as a partner in the extraction of lithium. Boric said the state will participate in the entire lithium production cycle in a “public-private collaboration” that the government will control. Any private company, whether foreign or local, that wants to exploit lithium in Chile must partner with the state.
- In the 1990s, the US was the largest producer of lithium and accounted for over one-third of global lithium production in 1995
Boric wants to create a National Lithium Company to partner with private companies. Currently, there are two companies that mine lithium in Chile: the US company Albemarle and Chile’s Chemical and Mining Society (Soquimich), which has been controlled for three decades by Julio Ponce, whose father-in-law was the late dictator Augusto Pinochet.
‘Open’ Argentina
Argentina, comprising a significant portion of the Lithium Triangle, has the world’s largest lithium project pipeline. Northwestern Argentina produces about half of the world’s lithium and hosts approximately 60% of the known lithium reserves. Most lithium in this area is found in salt lake (‘salar’) brines.
There are now several international mining companies active in Argentina. There are no restrictions concerning foreign investment and ownership of companies engaged in the exploration and extraction of mineral resources.
India joins the club
The Geological Survey of India (GSI) has identified 5.9 million tonnes of lithium resources in Salal-Haimana area of the Reasi district in Jammu & Kashmir, the first such anywhere in India, which imports lithium. The GSI has said the site is an “inferred resource”, which means it is at a preliminary exploration stage, the second of a four-step process (Reconnaissance, preliminary exploration, general exploration and detailed exploration).
With this discovery, India ranks sixth in terms of lithium resources, just behind leading producer Australia and ahead of China, the largest raw lithium importer and producer of lithium-ion batteries (Cullen S Hendrix. Peterson Institute for International Economics).
- From then onwards until 2010, Chile took over as the biggest producer with a production boom in the Salar de Atacama, one of the world’s richest lithium brine deposits
The discovery of lithium deposits can be a potential “game changer” for the country’s clean energy manufacturing ambitions in several ways, says SiddharthGoel, senior policy adviser at the International Institute for Sustainable Development. “First of all, the scale of the reserves is significant, and can — if proven to be commercially viable — reduce India’s reliance on imports of lithium-ion cells, which are a key component for EV batteries and other clean energy technologies,” he says.
But there is a flip side too. “Reports indicate that approximately 2.2 million litres of water are needed to produce one tonne of lithium. Further, mining in the unstable Himalayan terrain is fraught with risks,” cautionsSaleem H Ali, distinguished professor of Energy and the Environment at the University of Delaware.
Lithium mining in Chile, Argentina and Bolivia, for instance, has led to concerns over soil degradation, water shortages and contamination, air pollution and biodiversity loss. “This is because the mining process is extremely water-intensive, and also contaminates the landscape and the water supplies if not done in a sustainable method,” Ali says.
- Australia alone produces 52% of the world’s lithium
According to the IEA, “more than half of today’s lithium production is in areas with high water stress. Several major producing regions such as Australia, China and Africa are also subject to extreme heat or flooding, which pose greater challenges in ensuring reliable and sustainable supplies.”
Cornering China again
China is the world’s largest importer, refiner and consumer of lithium, buying 70% of lithium compounds and supplying 70% of lithium production, largely to domestic lithium battery makers, six of which are among the top ten in the world.
Chinese firms also continue to invest heavily in lithium mining, processing and lithium-ion battery production around the world. This dominance has ruffled many feathers. Both the European Union and the United States have prioritised building greater self-sufficiency in raw materials, including lithium.
The US, Australia, Canada, Japan, South Korea, and many European countries have established the Minerals Security Partnership to secure a non-Chinese supply of critical minerals, including lithium. The US government too has pledged about $370 billion for climate, clean energy, and environmental justice projects, including domestic lithium mining and refining. (Chemical & Engineering News, October 2022). “We have to outcompete China and make these technologies here in the United States—not have to import them,” US President Joe Biden said while promoting the Inflation Reduction Act.
- Chinese companies have acquired around $5 billion worth of lithium assets in countries like Chile, Canada and Australia. It also hosts around 60% of the world’s lithium refining capacity for batteries
European Commission president Ursula von der Leyen also announced the European Critical Raw Materials Act for lithium, rare earth metals. “The not-so-good news is—one country dominates the market. So we have to avoid falling into the same dependency as with oil and gas,” von der Leyen said.
Just five companies account for around three-quarters of global lithium production. Batteries are one of the primary drivers of the exponential increase in lithium production but its uses are also found in ceramics and glass, air treatment, lubricating greases, etc. In fact, of the 200 battery mega-factories in the pipeline up until 2030, 148 will be in China.
According to fDi intelligence, Ganfeng, Suzhou TA&A, Sinomine and BYD — a global battery and electric vehicle (EV) manufacturer which overtook Tesla in global EV sales in the first six months of 2022 — have all taken steps to acquire lithium mining rights in South America and Africa. “In the medium term, [the world] is still going to be reliant on [lithium] supply chains from China,” fDi.intellegence quotes Thomas Chandler, a critical metals analyst at SFA Oxford.
(With inputs from Associated Press, PTI, weforum.org)
