Source: Zhitong Finance
Chile, the world's second-largest producer of lithium, believes that the long-term risk in the lithium market lies in the production of too little rather than too much lithium.
For the global lithium industry, which is still dealing with the problem of excess battery supply chains, Chile, the world's second-largest producer of lithium, believes that the long-term risk in the lithium market lies in the production of too little rather than too much lithium.
Chilean Finance Minister Mario Marcel (Mario Marcel) said that in the next few years, there is a greater risk that lithium resources will once again be scarce than oversupply, as this may cause prices to soar and make battery replacement technology more viable. Therefore, in order to maintain the profitability and attractiveness of lithium battery manufacturing, lithium production needs to increase.
To ensure that this does not happen, Chile published a list of salt flats this week and opened up mining using a new public-private partnership model as part of a plan to double production over the next ten years.
Chile plans to double lithium production within the next ten years
Marcel said that two-thirds of Chile's additional production will come from$Sociedad Quimica Y Minera De Chile (SQM.US)$Cooperation program with state-owned Codelco; the remaining one-third comes from new projects. This goal does not include$Albemarle (ALB.US)$Business expansion plan in Chile.
Chilean President Gabriel Boric (Gabriel Boric) plans to develop the country's additional lithium resources, which are among the world's largest lithium reserves. His plan aims to end years of loss of market share due to strict production quotas.
Specifically, Borich's plan is divided into three categories. Two of these salt flats are considered strategic resources, and future contracts related to these salt flats will be controlled by the state. In the other two salt flats, state-owned enterprises will have the flexibility to negotiate terms with private partners. In this last category, for as many as 26 additional regions, the government will use tenders to distribute contracts.
The Chilean government expects three to four new projects under development by 2026, including the Maricunga project led by Codelco, another area currently controlled by a state-owned company, and several privately operated projects. Marcel said it would be “very difficult” to open another mine in the huge Salar de Atacama (Salar de Atacama) given the limited water resources.
Is the lithium market picking up due to frequent premium trading?
If Chile can achieve this goal, the influx of new lithium supplies will be welcomed by the electric vehicle supply chain, as the market's demand for lithium grows as the shift away from fossil fuels increases. However, the current lithium market is still highly volatile and immature.
Previously, lithium prices soared at the end of 2022 as battery makers hoarded inventory in accelerated electric vehicle sales, then fell sharply last year as buyers reduced their inventories.
However, according to recent reports, four lithium deals have been reached at higher prices in the past two weeks, which further shows that the battery raw material market has stabilized after the price plummeted 80% in the past 12 months.
Miners said that in the industry's broader discussions on pricing transparency, spot market prices are lagging behind their selling prices. Contract prices are generally not disclosed, but price providers can increase prices by incorporating these lithium deals into their calculations.
Joshua Thurlow, president of mineral resources' lithium business, said in a statement on Thursday: “Last week, MinRes sold spodumene concentrate for $1,300 per ton, which is more than 10% higher than the current spot price. “It's clear that as long-awaited supply projects slow down or fail to materialize, the market is becoming aware of future demand for lithium, which is necessary for the global energy transition.”