The Chilean government wants to partially nationalize the country’s lithium reserves. This was stated by the leftist Chilean President Gabriel Boric last week. At 9,3 million tons, the country has the largest amount of lithium among global reserves. All companies dealing with the valuable raw material in Chile will henceforth be forced to involve the government as a partner.

Many details about the plan are not yet known, and the legislature is yet to approve it. The US is expected to exert a lot of diplomatic pressure to try to turn the tide. Global reserves of lithium are estimated at only 98 million tons. Of these, the largest amount is in Chile (9,3 million tons), followed by Australia (6,2 million tons), but some 5,9 million tons were also recently discovered in India.

World’s second producer

The rare metal has been in high demand recently as it is an important component for rechargeable batteries for smartphones, laptops, or electric vehicles. With 39 000 tons of lithium mined, Chile was already the world’s second producer, after Australia with 61 000.

But now President Boric wants to tighten the Chilean government’s grip on the lithium industry, where the so-called white gold is mainly extracted from salt flats of the Atacama Desert in northern Chile.

Boric’s plan evokes memories of the policies of socialist Chilean president Salvador Allende. In 1971, he nationalized the copper mines, still Chile’s main export product. Somehow, he also marked his downfall with it because a few years later, Allende was deposed in a CIA-backed coup.

US wary

The contracts with the two lithium mining companies currently operating in Chile would however be upheld for now. China-controlled Soquimich (SQM) paid more than 4,5 billion euros to the Chilean government for mining lithium last year. US-based Albemarle paid around 550 million euros. For that matter, SQM’s contract expires in 2030, and Albemarle’s in 2043.

Still, the Americans are watching the situation with suspicion. Half of the US EV subsidy is based on sourcing critical minerals, including lithium. Since April, 40% of minerals by value must come from the US or a free trade partner to qualify – Chile and the US signed a bilateral trade agreement in 2005. By 2029, it will be 80%, but without Chile, it will be difficult to meet this requirement.

Europe is also very dependent on Chile for the raw material. Off all the lithium imported by EU member states in 2020, 80% came from Chile. Late last year, The EU signed a new trade agreement with Chile to further intensify lithium trade.

Smaller carbon footprint

More specifically, Boric wants to establish a new national state-owned lithium company. Exploration, exploitation, and value creation will then be done through public-private partnerships.

Furthermore, he also wants a smaller carbon footprint so that less salt water is lost during the production process. Indeed, mining lithium requires a lot of water and releases large amounts of CO2, while the Atacama has the highest solar radiation levels on Earth – water evaporates thus astonishingly fast. At the same time, Boric also wants to better protect biodiversity in the salt flats.

Furthermore, he also wants the indigenous and other communities near the mining sites to benefit more from the mineral resources by distributing their revenues in a more equitable way, e.g., by building new hospitals and schools.

But before that happens, Boric needs the approval of the Chilean parliament, and that vote promises to be no formality as the president does not have a majority.