By Juan Carlos
What would you say are the main obstacles facing
lithium developers in South America?
Hurdles vary by country. Let us
start with Chile. As I argued almost two years ago in a reply
to a commentator of a report on lithium including my points of
view published by UK newspaper, The Guardian, most
predictions about lithium availability take Salar de
Atacamas production for granted.
Indeed, without significant
production from the driest desert on earth, none of them make
any sense. I then went on to ask myself: but what if Atacama
fails to deliver the lithium necessary for all the different
competing uses in the following years? And my answer was: I
have reasons to believe that that could in fact be the
This has nothing to do with
reserves. It pertains to availability of a key element in brine
production nowadays: water. This point was already raised in
November 2010 by an executive of Sociedad Quimica de Minerales
(SQM) at the Senior Expert Group Meeting on Sustainable
Development of Lithium Resources in Latin America: Emerging
Issues and Opportunities, held in Santiago, Chile.
According to SQM, to evaporate two
litres of brine, 100 litres of water from the borders of the
salar are required. To this, we must add the regulatory
measures in Chile that consider the lightest metal on earth as
strategic limiting lithium concessions to only two operators,
one of which (SQM) appears to have already reached the maximum
possible level of extraction before it can affect the
agricultural activities occurring on the borders of the
Indeed, between 2012 and 2013, the
Chilean government tried to expand lithium production through
the so-called Special Lithium Operation Contracts (CEOL, in
Spanish). Unfortunately, this process was plagued with errors
and accusations of conflicts of interest (involving precisely
SQM) that in the end forced the government to abort it.
Regarding Argentina, it is well
known that until recently this country was thought of as almost
the promised land for lithium. As I argued in a
2011 article, however, everything changed dramatically once the
government decided to apply exchange rate controls to all
mining operations in Argentina.
The situation now is that most - if
not all - mining operations have completed their exploration
and pilot phases of development and are preparing to start
producing lithium. Chances are that they wont produce
anything unless those exchange controls are lifted, however. In
this connection, I have just learned from a reliable source of
information that many international companies operating in the
Argentine Puna will put on hold their production plans until a
new political situation is visualised in Argentina. That could
only happen after presidential elections and an eventual change
of government in 2015.
Lastly, as I have written
extensively over the last four years or so, Bolivia has missed
a golden opportunity to become a lithium superpower following a
failure to come up with a plausible technical approach to
produce lithium carbonate on its own after six years of
In sum, South America appears to
have entered a sort of conundrum of which nobody knows it will
be able to get out in the following three to four years, which
leads me to forecast a virtual stagnation of lithium production
from brine in the world in that time frame. Under these
circumstances, Australia will eventually consolidate its
leadership in the lithium market and Canada and other countries
(possibly Serbia, the US, China?) are likely to emerge in the
years to come as the new reliable sources of lithium (albeit
mostly mineralised) on the planet.
You have said in the past
that you believe Japan will become more involved in the lithium
resource market, are there any indications that this is
Not really, the only visible
Japanese company with a significant investment in the lithium
industry nowadays is Toyota, through its subsidiary Tsusho, in
Salar de Olaroz, Argentina.
At first sight, this move seems to
be in contrast to what Toyota has been saying all along with
respect to completely electric vehicles (EVs). However,
Toyota«s business strategy with this regard consists of
three parts: one, prepare for the transition to electric
propulsion, in which case it makes sense for the Japanese motor
giant to invest in lithium (as part of a long-term
perspective); two, delay as much as possible the up-coming EV
revolution so as not to kill its hybrid Prius, which explains
why Toyota doesnt like (at least in the medium term) pure
EVs; and three, go beyond lithium, which clarifies
Toyotas recent inclination toward fuel cells.
Lastly, it remains a bit of a
puzzle why other Japanese companies heavily involved in both
Li-ion battery manufacturing (an argument that can be extended
to electric car production as well) have not yet shown much
interest in ensuring access to an adequate amount of lithium
resources in different parts of the world.
What about the current
supply/demand situation and what does this mean for would be
developers of lithium in South America?
An interesting upward trend for
battery-grade lithium carbonate and lithium hydroxide prices is
beginning to emerge which might be an indication of
excess-demand for lithium in the near future.
This could be of course exacerbated
if Elon Musk, CEO of Tesla Motors, project to build the
worlds largest Li-ion battery in North America is
crystallised in the short term. But, in general, the horizon
for junior lithium developers in South America doesn`t seem
really bright unless they bet on production of high-purity
lithium compounds, a task for which they are not likely
prepared at the present time.
So perhaps in order to survive some
of them may be forced to get involved in strategic alliances
with bigger partners - either in the lithium industry as such
or in the downstream of the lithium value chain.
Which South American
country has the opportunity to exploit the most lithium
resources? Is it doing so? If not, why not?
After having realised that the
lithium industry in South America is indeed confronting serious
problems right now, I am hesitant to suggest which country
would have an unambiguous competitive advantage to exploit the
most lithium resources in the short or medium term.
Nevertheless, there are reasons to
believe that Chile still has the opportunity to increase its
levels of production so long as it is able to put together a
plan to recover its previous leadership of the market. After
all, it is there where the most high-concentration lithium
reserves are deposited and it is there where the most lithium
is extracted from in South America. Time will tell, though,
whether the up-coming government understands the new market
conditions and acts accordingly.
Can South America maintain
its crown as lowest cost-per-tonne producer?
The answer is a definitive no.
Things have changed since the times South America became the
lithium king as the lowest cost-per-tonne producer. In this
sense, I foresee a situation in which the three countries,
namely Chile, Argentina and Bolivia, forming the so-called
lithium triangle, will have to develop a rather combined
strategy of production where solar evaporation co-exists with
other more sophisticated and costly methods of lithium
Could you comment on the
recent Tesla news?
In recent times I have written
extensively on Tesla Motors. Overall, my views have favoured a
positive development of a start-up company that is beginning to
change the whole spectrum of what could be called the new
lithium economy in the world.
In this connection, my findings
have been astonishing. First, following my observation about
nine months ago, that Teslas Model S had become a threat
for Toyotas (TM) luxury hybrids (Lexus), I have since
shown in my latest research that this can be extended not only
to all luxury hybrids but also to all luxury internal
combustion engine (ICE) cars of similar price to the Model S in
the US market for the period January 2013-March 2014.
Second, I have also discovered
that, during the period January-November 2013, Tesla Motors
consumed 2,090 tonnes of lithium carbonate equivalent (LCE),
which amounted to 72% of all the lithium required for the
production of Li-ion batteries used by all the plug-in vehicles
commercialised in the US and 68% of all the lithium required by
all the hybrids and plug-ins sold in the same market.
Assuming a lithium global demand of
168,000 tonnes for 2013, Teslas lithium consumption that
year would have been 1.24% of the worlds lithium
consumption. Hence to materialise its prospects to produce
500,000 EVs by 2020 in the US, Tesla would alone require
between 40,800 and 59,442 tonnes LCE, which translates into
between 24.29 and 35.38% of all LCE consumed in the world in
2013. These numbers were based on information on lithium
content in Li-ion batteries using a Li-Ni-Co-Al chemistry as
suggested by Argonne Laboratory.
Third, after reviewing the
scientific literature on disruptive innovation as applied to
electric cars in general and Teslas Model S in
particular, I have argued in a recent post that Clayton
Christensens approach to this issue may be much more
powerful than what most critics would believe, concluding that
Teslas Model S may indeed be considered a disruptive
innovation which in turn led me to establish also that Tesla
Motors is a disruptive company.
This, in essence, means that it is
beginning to change the whole automotive industry with enormous
implications for the lithium value chain.
Lastly, in light of my previous
comments, I am now of the view that Tesla Motors is indeed
giving lithium and lithium producer countries (in particular,
Bolivia, Chile and Argentina) a last chance to assume the
challenge of being part of the new way of doing
things in the world that we can foresee for the coming
*Juan Carlos Zuleta is a Latin