As one of the important materials for energy storage batteries, lithium is known as “white oil”. Because it plays a very important role in the global energy green transformation and reshaping the energy order.

Lithium is the least dense and lightest metal element in nature. Because of its ability to store energy efficiently, it has become an important part of new energy vehicle power batteries and electrochemical energy storage. The spurt development of new energy vehicles has led to a surge in demand for power batteries. Comprehensive energy storage, environmental protection, safety and other requirements, lithium batteries occupy a clear advantage and are in a dominant position. The intermittent and volatile nature of renewable energy sources such as solar and wind energy has led to the rapid development of the energy storage industry. For the time being, the demand for lithium batteries in the energy storage industry is also increasing day by day.

With the growth in demand, the price of lithium has also gone up.

On October 18, Australian lithium miner Pilbara announced that its seventh lithium concentrate auction of the year and tenth in history was conducted on the electronic trading platform BMX. The originally planned lithium auction had ended early. The sale price was US$7,100/ton FOB, another record high. The auction sale price was 1.6% higher than the auction sale price on Sept. 20. After accounting for shipping costs, the cost of producing this ore into battery-grade lithium carbonate is about $540,000 per ton.

On October 24, Pilbara announced again that it had signed another contract for 5,000 dry tons (SC 5.5) of lithium concentrate after completing the pre-auction on October 18. The sales price was increased to US$7,255 per dry tonne and priced at US$8,000 per tonne after pro-rating and adding freight.

Lithium concentrate prices in the upstream segment remain high. Since October, the price of battery-grade lithium carbonate has been rising, and the spot price of battery-grade lithium carbonate on the Wuxi electronic market reached 603,000 yuan per ton on Nov. 1. It is 11,500 yuan/ton higher than the previous day, another record high.

Oil is an important foundation of the modern industrial system. And the OPEC organization established with Saudi Arabia and the UAE as the head dominates the world’s main supply of oil and influences the international pricing power of oil.

As countries around the world continue to make the transition to clean energy, lithium is becoming one of the world’s most important commodities. Global competition for lithium resources is intensifying. Several of the world’s largest countries holding lithium resources, intended to follow the rise of oil-producing countries, allied to create a “lithium OPEC”.

Argentina, Bolivia and Chile are drafting a document to promote the establishment of a lithium industry Organization of Petroleum Exporting Countries (OPEC, OPEC), said sources in the Argentine Foreign Ministry on October 20. So as to reach a “price agreement” in the case of lithium ore value fluctuations. OPEC sets production levels that affect the price of lithium in the same way that OPEC affects the price of crude oil per barrel. If Argentina, Chile and Bolivia can reach a consensus, then another major lithium producer, Australia, could also come close to this “price convergence” idea.

The 39th ECLAC Conference, on the theme of production, sustainability and inclusion, was held at the Kirchner Cultural Center in Buenos Aires from October 24 to October 26 local time.

One of the highlights of the meeting’s agenda was the proposal to integrate multiple steps to industrialize the lithium chain locally, promoting the exploitation of the lithium triangle (Argentina, Bolivia and Chile). And to develop the automotive industry in Brazil and Mexico to provide electric vehicle prototypes and buses.

The concept of “lithium OPEC” is heating up again, which undoubtedly releases a clear signal. That is, the renewable energy revolution in the industrial wave, resource-exporting countries must also have the impulse to control the upstream supply to get a piece of the pie. Lithium industry “OPEC”, South America “lithium triangle” to get what you want? How the future impact?

Three South American countries to create a lithium industry “OPEC”.

According to the International Energy Agency (IEA), the average electric vehicle requires 8.9 kg of lithium. For lithium carbonate, the raw material for batteries, 40 kg to 50 kg is required.

The IEA also predicts that working together to achieve the goals of the Paris Agreement will mean tripling the demand for minerals for clean energy technologies by 2040. A transition to net zero global emissions by 2050 would require six times more key minerals by 2040 than today. In the Sustainable Development Scenario (SDS), global lithium demand will increase 42-fold by 2040 due to a spike in demand for electric vehicles and battery energy storage.

Latin America’s huge lithium resources highlight the importance of the region in the global energy transition. The most lithium-rich region is widely known as the South American “lithium triangle”.

The “Lithium Triangle” is located in the southwest corner of the South American Andes. It is a lithium-rich region. The “Lithium Triangle” straddles the borders of Argentina, Bolivia and Chile. According to the 2021 USGS Mineral Commodity Summary, of the world’s proven lithium reserves of 86 million tons, about 58% come from Bolivia, Argentina and Chile, 21 million tons, 19.3 million tons and 9.6 million tons respectively.

In terms of production, Australia’s lithium supply dominates. Its production in 2021 will be 55,000 tons, accounting for more than 50% of global production. Argentina and Chile combined account for about 32% of global production.

Despite the abundance of lithium resources in Latin America, the utilization of lithium resources in Latin American countries is still stuck in the simple production and processing of raw materials due to factors such as capital and technology level. Therefore, these countries hope to establish an OPEC-like lithium alliance to maintain reasonable stability of lithium prices and improve the economic benefits of lithium resources.

In fact, the idea of the lithium industry “OPEC” has a long history. As early as 2011, Argentina, Chile and Bolivia had planned to establish an industrial alliance to strengthen the control of lithium production and prices. The discussions were later shelved due to differences in the governing philosophies of the Chilean and Bolivian governments.

Since 2021, global lithium industry mergers and acquisitions have accelerated, objectively promoting the union of lithium-producing countries in Latin America. In addition, after the election of left-wing coalition candidate Gabriel Boric as president of Chile in December 2021, the fervor to form a coalition of lithium-producing countries resumed.

On April 13-14, 2022, Bolivia, Chile, Argentina and Mexico held the first “Latin American Lithium Outlook” video conference. The meeting decided to hold an offline meeting on international lithium resources in Bolivia during the year to promote the formation of a lithium alliance. Since July of this year, the Foreign Ministers of Argentina, Bolivia and Chile have been negotiating a joint declaration to be submitted to their respective Presidents. At the just concluded 39th ECLAC meeting, the countries identified lithium as a key topic. They proposed to integrate multiple steps to industrialize the lithium chain locally.

Australia’s competition and the shortcomings within the “lithium triangle”.

In February 2022, the CELAC Working Group released a report, “Panorama of Lithium Resources in Latin America”. This report points out that Latin American countries are rich in lithium resources and have high mining potential, offering the possibility of building a regional value chain. However, this is influenced by two variables: international prices, production and export capacity. And there are limitations to the productive integration of lithium chains in some of these countries.

The history of OPEC’s establishment and development shows that its control over oil prices did not happen overnight. Instead, production is the basis for determining the discourse. Returning to lithium, the three South American countries are not dominant in terms of annual production, despite their large reserves. Chile’s production is less than half that of Australia.

Until 2018, South American production can still compete with Australia. However, due to the limitations of domestic lithium mining, South America has limited new production each year. Now it is gradually becoming “dominated” by Australia. According to the global production and upcoming production of the salt lake and lithium pyroxene production, Australia’s lithium mine will remain the main force of new supply. In addition, the auction price of lithium concentrate from Australia’s leading lithium mine Pilbara has repeatedly become the global lithium price vane.

Considering the “lithium triangle” of the three countries in South America accounted for the proportion of lithium reserves and lithium production, as well as the difficulty and relatively low cost of lithium mining in these countries. The idea of forming a lithium industry “OPEC”, if reached, will have an impact on global lithium supply and lithium prices. After the establishment of the lithium industry “OPEC”, the overall for current lithium mining and supply is benign.

Specifically, the efficiency of the dialogue with the middle and lower reaches of new energy vehicle companies will be greatly improved. Both sides can not only negotiate the price, but also negotiate the future development path of lithium batteries, technology needs and other aspects. If the lithium industry “OPEC” process goes smoothly, it will be beneficial to China in the field of lithium prices and lithium investment. But to a certain extent, it also adds to the uncertainty of lithium resource supply negotiations.

In addition to the lithium industry “OPEC”, recently, the world’s largest nickel producer, Indonesia, is also studying the establishment of an OPEC-style cartel of nickel and other key battery metals. In this way to highlight the geopolitical confidence of its key mineral resource country. The country’s investment minister, Bahlil Lahadalia, said Jakarta is looking at mechanisms similar to those used by OPEC. These mechanisms could be used to supply metals that are critical to the energy transition.

I do see the benefit of creating OPEC to manage oil trade to ensure predictability for potential investors and consumers,” he said in an interview. Indonesia is looking at the possibility of forming a similar governance structure for the minerals we have, including nickel, cobalt and manganese.”

In the transition to clean energy, key minerals pose new challenges to energy security. The development of clean energy technologies relies on a variety of key metallic materials. The development of the global clean energy industry will trigger a new round of international competition, and the mineral resource supply and demand situation is changing significantly and becoming the focus of resource games between countries.

2022-11-04T08:16:40+00:00 November 4th, 2022|Tags: |