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Chile: Electronic cars an opportunity for lithium-rich Chile

Global demand for lithium is on the rise thanks to its use in electric car batteries. That could mean big business for Chile, which has near 23 per cent of the world’s reserves. A leftover dictatorship-era statute, however, threatens to stand in the way.

Traffic is still slow at the seven electric car charging stations that Chilectra, a local electricity provider, has set up around Santiago. But that will no doubt change, which is why the company is planning to install 20 more such stations – outside of hotels, office buildings and in residential developments.

“By 2020, at least 10% of the cars in major cities will be electric,” says Jean Paul Zalaquett, Chilectra’s innovation director.

What the owners of these cars don’t know is that the batteries used to store that electricity also contain a local product: lithium carbonate. According to studies carried out by the Chilean Copper Commission, a government agency, Chile has close to 23% of the world’s lithium reserves. Neighboring Argentina and Bolivia are also lithium-rich. Together the three countries boast more than half of the world’s reserves.

Right now, Chile produces close to 40% of the approximately 140,000 tons of lithium carbonate sold annually around the world. Overall, the global lithium industry is worth some $800 million. Thanks to an expected boom in electric cars, the industry is likely to grow rapidly in the coming years – with annual production tripling by 2030, according to projections by the consulting firm Signumbox.

“It has already grown by between 5% and 7% over the past decade, basically because of [electric] car batteries,” says Daniela Desormeaux, Signumbox’s general manager.

But Chile also faces a real risk of falling behind in an industry it has long led. In the late 1970s, the military government of Augusto Pinochet classified lithium as a “strategic material” because of its possible uses in nuclear fission. The classification has kept potential investors at arms length by prohibiting the state from negotiating lithium extraction concessions.

As a result, lithium mining has been limited in Chile to just one location – in the northern salt flats of the Atacama desert. Only two companies operate there: SQM, a Chilean firm that produces 24% of the world’s lithium; and Chemetall, a German company that accounts for 16% of global production. Both companies, whose concessions predate the restrictions, rent the desert land from the Chilean state.
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