16 Aug “We must continue to make progress developing a lithium industry at all levels”
The new Director of Cesco, Daniela Desormeaux, states that there are varied but complex options to generate an added value industry around this soft metal and, while there are geographical and economic barriers, the country holds a privileged position in terms of cost regarding competitors such as Australia and China. And despite the uncertainty created by the trade war between China and the US and the country’s difficulties in becoming an electric battery producer, the economist says that the fundamentals of this industry remain solid thanks to the energy transition to electromobility that has come to stay.
“We cannot necessarily be competitive in all aspects, however considering the growth potential of lithium for electromobility, we must have a long-term perspective that seeks to create more value in Chile.” This is summarized by Daniela Desormeaux, Director of the Center for Copper and Mining Studies (Cesco) and Market Intelligence in Minerals and Commodities of signumBOX about the country’s situation in the lithium industry. Today, this position is questioned due to the difficulties in attracting companies that develop the local market.
In an interview with Cesco, the economist from the Catholic University says that despite the barriers Chile faces in creating this value-added industry around the mineral, the country must take a long-term look and pursue its position in the value chain, through a properly regulated market, but based on a close state-company relationship.
In recent years there has been much talk of a lithium boom, mainly because of its applications in technology and energy storage. Is Chile in a good position to lead the offer? How are we doing compared to competitors such as Australia and China?
The concept of leadership can be evaluated from different perspectives. Today we can say that Australia is the leader as it is the largest producer in terms of “primary” lithium (lithium concentrate). However, only this year it will start producing lithium chemicals (lithium hydroxide), which in Chile has been produced for many years. In terms of production of lithium chemicals, China leads the way.
Another way of seeing leadership is related to production costs. Chile has the best and largest lithium reserves in the world, which together with optimal environmental conditions, makes the production of lithium chemicals in Chile have significant cost advantages if compared to its main competitor, China. However, we know that this is not all, and that we must continue to develop this industry at all levels in order to ensure a sustainable and profitable production for years to come.
Why has the setting up of the lithium value-added industry in Chile been difficult? What strategy do you think should be appropriate for the new call to be successful and Chile manages to attract companies to produce lithium value-added products?
When talking about added value, the options are varied and, in turn, complex. The experience in other industries (copper, for example) has shown us that we cannot necessarily be competitive in all aspects. However, considering the growth potential of lithium for electromobility, we must take a long-term perspective that seeks to create more value in Chile.
In relation to the industry of electric vehicle batteries, one of the difficulties, among many, is that this industry is in a permanent development and innovation process, and the combination of materials and optimal technology that allows for high-performance (autonomy and power) and thermally stable batteries is still unknown. To quote a specific example, it is still uncertain whether the material that will be predominantly used in the cathodes will be lithium hydroxide or lithium carbonate. This depends on how the market evolves, and, by the way, also on technology. With the development of solid-state batteries, we don’t know the impact it would have on materials of the lithium fluoride type (currently used as electrolyte material), or if metal lithium will begin to be used to a greater extent.
Another constraint: batteries contain other minerals, not just lithium – which are not necessarily found in the country or in the region – and about which there is also uncertainty regarding their future use. Lastly, our country is located far from the battery assembly and end-use manufacturing centers, which certainly makes the model more complex. However, that is the current scenario, and we know that in the future this may change as more countries begin to implement policies in favor of electromobility.
How do you think the new trade scenario between the US and China impacts the supply of critical metals and minerals for the energy transition the world is living?
The scenario is complex and the lithium industry is not exempt from the uncertainty that this generates. We see a somewhat slower demand that is waiting for how this conflict will be resolved. However, electromobility is not something of the future, and the energy transition in this regard is something we are already seeing. More and more companies and countries are joining, with considerable investments in this area. Therefore, with a longer-term look, I believe that the fundamentals of the lithium industry remain strong, much more so than those of any other mineral industry.
Recently the Chamber of Deputies approved to declare the activities linked to lithium of national interest, specifically that the State has the absolute, exclusive, inalienable and imprescriptible domain of all mines, including the salt flats. What is your opinion on this measure?
I believe that these measures generate uncertainty and hinder the development of the industry. It does seem to me that the role of the State is key to the lithium industry; salt flats are sensitive ecosystems, and lithium production generates externalities. This requires a close state-company relationship, with mechanisms for monitoring high and transparent standards, with clear rules and permanent supervision.
What about prices? Are there projections on the impact of lithium on mining activity and on the Chilean economy?
Between 2015 and 2017, the prices of the different lithium compounds practically tripled, a situation that was not observed in any other industry. In my opinion, this increase in prices was greater than the growth in the fundamentals of the market, so what we are seeing today is a “normalization” of prices, towards equilibrium or long-term prices (lower than the current ones).
With regard to projections, although the growth of the lithium industry is considerably higher than other industries – we estimate an average growth in lithium demand between 12% to 14% average per year over the next 15 years – the impact on the Chilean economy will continue to be much less in relation to the copper industry, for example.