The impetus behind renewable energy and electro mobility is driving increasing demand for lithium, but if Chile fails to take the right steps it could miss the chance to become the global leader in the field. The main challenges towards that goal include progressing from the exportation of the raw material to that of more sophisticated products, while not overlooking the production and refinement of the mineral itself, as well as ensuring the incorporation of new technologies and well-trained human capital.
The Atacama Region of northern Chile is home to the best lithium deposits in the world in terms of concentration and environmental conditions. The country also holds 50% of global reserves of the mineral and, as such, is the world leader in production of what is also known as ‘white gold’. However, Chile has not, as yet, successfully developed the lithium industry to the extent of the one built around the nation’s principal mineral export, copper.
Therefore, Chile has tremendous potential in the field of lithium. Nevertheless, if it fails to take advantage of this potential it may well miss out on the exponential growth of the global demand for the mineral, which is primarily driven by the rise of electric vehicles and renewable energy devices that require lithium for use in batteries and storage systems.
One problem currently facing Chile is that its national lithium industry mainly produces the metal compound of lithium carbonate and, in smaller quantities, lithium hydroxide, which is the form used in energy storage. Lithium hydroxide is also the purer form and, although it is more expensive to produce, it achieves a higher commercial price.
In January 2015, the National Lithium Commission (CNL) devised a report in which it recommended the design of a new national lithium policy and improvements to Chilean governance of its salt flats. These recommendations were put into practice by president Michelle Bachelet in January 2016. The subsequent changes gave rise to increasing numbers of alliances between the Chilean Government, the private sector and academia as part of general efforts to provide value added to the industry, as well as to raise purity grades and bring about the production of more sophisticated products.
Industry experts now agree that this is the correct path the follow. The economic impact and subsequent development of new technologies could be significant, potentially attracting new research centers and scientists to the country, all of which are crucial components in securing favorable future positioning of the industry.
For a number of years, demand for lithium has been bolstered by the increasing circulation of electric and hybrid vehicles that require batteries composed of the mineral, particularly in the United States, Europe and Asia. This growing demand has also been in response to evolving environmental norms and consumer behavior in which individuals are increasingly conscientious about the effects of climate change.
Nowadays, electric vehicles total fewer than one million units worldwide, although this figure could soar to 40 million by 2035. Such a scenario would boost global lithium production from approximately 180,000 tonnes in 2016 to more than a million tonnes over the same timeframe, according to data from Corfo, the Chilean economic development agency. In fact, the US firm Tesla has announced the goal of producing 500,000 electric vehicles a year to 2025, while China may have up to three million in circulation by the mid-2020s.
Rising demand will also materialize from the growing global market in stationary batteries that are used in conjunction with renewable sources of energy. This is especially likely in developed countries, where such batteries are already beginning to play a significant role in national electricity grids.
According to the aforementioned 2015 CNL report, annual global demand for ‘white gold’ will rise by 8% to 2025, i.e., to a total of between 350,000 and 400,000 tonnes of lithium equivalent in eight years. Moreover, the worldwide battery industry will significantly increase its share in the consumption of lithium, expanding from 40% of all demand for the mineral in 2014 to approximately 63% in 2025.
The CNL report also points out that new battery technologies will require greater quantities of lithium hydroxide compared to lithium carbonate. This may increase the overall share in terms of production of the former from 19% to 31% over the same time period.
This aforementioned aspect is crucial, since 89.4% of lithium exported by Chile relates to lithium carbonate, whereas lithium hydroxide represents 6.9%, according to the Chilean Annual Mining Directory 2015 that was produced by the National Geology and Mining Service (Sernageomin) of the Ministry of Mining. It should be noted that these lithium compounds are produced in the country by the Chilean company Sociedad Química y Minera (SQM) and Rockwood Lithium, a subsidiary of US-based Albemarle Corporation.
In this context, the former executive secretary of CNL and mining consultant, Ignacio Moreno, concurs with the existence of this rising trend and projects that 80% of the demand for lithium to 2035 will specifically relate to vehicle batteries.
Currently, the battery industry is growing at 10% per year and could achieve growth rates of between 15% and 18% over the short term. This would help to drive the search for new lithium deposits, according to Daniela Desormeaux, a consultant from signumBOX.
Furthermore, Moreno believes that the lithium market could double in size in the next six or seven years, if production increases in line with the rising demand for the mineral from the battery industry.
Eduardo Bitran, executive vice president of Corfo, points out that the present global market of lithium carbonate moves 180,000 tonnes of the mineral per year, with an average price of US$7,000 per tonne. Nevertheless, he predicts that to 2035 close to one million tonnes of lithium could be produced around the world, with values that may reach up to an average of US$10,000 per tonne, depending of the value added that is achieved.
Therefore, the challenge of creating a lithium industry 2.0 in Chile requires additional production of lithium hydroxide. Importantly, the demand for this particular compound is already exceeding that of lithium carbonate to 2027, due to the former’s superior properties in relation to the manufacture of batteries, as well as thanks to ongoing efforts to secure enhanced value added.
The majority of relevant players agree that the best way to develop a lithium industry is by means of a consortium that involves the public and private sectors and academia.
In 2014, the Lithium Innovation Center (CIL) of the Universidad de Chile manufactured Elibatt 4.0, the first nationally produced battery for use in both electrical devices and in a renewable energy context. The project involved ongoing collaboration between universities and business and even predicted the construction of a factory to that end in 2015, although the factor never materialized. Jaime Alée, director of CIL at the time, explains that the business model was not sufficiently attractive to raise the required capital for the factory. Nevertheless, he proposes that the next steps required to drive the sector forward include deepening university relations with the business world and bringing sophisticated industry with genuine interest in this particular field to the country, such as Tesla, which is currently building its new Gigafactory in the desert of Nevada, United States.
Further alliances have also been forged, including that between the Chilean firm Nanotec and Rockwood Lithium, which is conducting research into and development of lithium nanoparticles that, according to Patricio Jarpa, CEO of the former, are considerably advanced. Jarpa explains that Nanotec has created the first nanoparticles of lithium metal with a high grade of purity, in addition to good size conditions and physical properties. The first samples are undergoing testing in Germany, South Korea and the United States, and results are expected in the short term.
“A battery for devices such as cell phones and means of transportation that contain nano-lithium is going to be more attractive because these smaller particles are more reactive and we expect them to allow the batteries to last longer (three or four years). At the same time, we are looking at ways to make batteries charge more quickly”, explains Jarpa.
Following in the footsteps of the academics at the Universidad de Chile is Mario Grágeda, director of the Center for Advanced Research into Lithium and Industrial Metals (CELiMIN) from the Universidad de Antofagasta. Grágeda is leading a project financed by the Scientific and Technological Development Support Fund (FONDEF), which received CLP140 million from the National Commission for Scientific and Technological Research (CONICYT) to manufacture a 10-ampere battery for use in mobile and transportable devices, including electric bicycles.
The team at CELiMIN is currently working on a prototype lithium-ion battery using compounds of the mineral from the Atacama salt flat. Their aim is to develop new materials with greater charging capacity and thermal stability in which the cathode is the most important element. The prototype could be used in any kind of electrical mobile device, including cell phones or laptop computers. The final and fully functional model is expected to be complete by the end of 2018.
The Center also works on the development of new cathodic active materials based on lithium compounds, with a view to making production processes more environmentally friendly. By utilizing these technologies, the extracted component passes directly from the brine to lithium hydroxide using an innovative electrochemical system.
Similarly, the Universidad Católica (UC) is working in conjunction with Rockwood and Argonne National Laboratory in studying a new lithium carbonate that is able to increase the storage capacity and lengthen the life cycle of batteries. René Rojas, the academic at the Faculty of Chemistry at UC who is leading this project, states that the main challenge is to introduce materials for cathodes. However, this process, he explains, requires minerals such as manganese, cobalt and nickel, all of which are currently mined in Chile.
Eduardo Bitran explains that to the end of March 2017 a call for tender was made to international companies, operating in the area of producing value added to the lithium industry, to formally submit their proposals to begin operations in Chile. The tender was open to companies working in the fields of electro mobility (batteries and components) as well as other lines of use such as chemical applications or for cell phone batteries.
Corfo will assess the proposals at the end of August, at which point it will draw up a short list prior to announcing which applications are deemed pre-qualified in September. Pre-qualified applicants will then have 90 days to submit their adjoining bid. The State will make a total of 16,000 tonnes of lithium carbonate equivalent available for exploitation at preferential prices.
Bitran explains that Corfo, “has compiled future technological prospects and we understand that the most probable outcome, although we are not discounting other possibilities, is that certain battery components like cathodes and electrolytes that have high lithium carbonate and hydroxide contents, will be the primary candidates for production in Chile”.
Similarly, the multinational firm Rockwood has been proactive in increasing production and supporting efforts towards value added. This is largely due to the agreement the company signed in January 2017 with Corfo in which the multinational was awarded a maximum period of 27 years to boost production of lithium from 24,000 to 82,000 tonnes per year, as well as being awarded a new quota of lithium metal equivalent up to a maximum of 262,132 tonnes. This agreement must be fulfilled in strict compliance with the current Environmental Qualification Resolution (RCA) and relevant permits from the Chilean Nuclear Energy Commission (CChEN).
Rockwood also has the option, under the conditions of the agreement, to construct a third plant for battery grade lithium hydroxide to produce 5,000 tonnes, with an additional quota of 34,776 tonnes of lithium metal equivalent. This could enable the company to meet the projected demand for the compound, which is expected to exceed that of lithium carbonate.
The agreement will, therefore, imply that the US-based firm will direct up to 25% of total production for marketing to international companies at preferential prices, according to the lowest value over the previous six-month period. As a result, Rockwood will be obliged to base its operations in Chile to produce lithium derivatives with value added.
César Jil, head of lithium extraction at Albemarle Corporation, believes that this agreement, “will position Antofagasta at the epicenter of global lithium production, developing a value added industry that we are certain will transform the region into the vanguard of technological development”.
The plan is to construct Rockwood’s second lithium plant in the previously announced symbiotic park, which the government intends to build adjacent to existing solar power plants located in northern Chile. This step forms part of an ambitious national agenda being put into action to take advantage of the clean natural resources available in the Atacama Desert and thereby transform Chile into a serious producer of solar power.
The agreement between Rockwood and Corfo includes a unilateral contribution of up to US$12.4 million that is destined for research and development in the country for the expansion of mining and solar potential in the north of Chile. Moreover, it creates a significant benchmark that will attract further international investors to the country that possess the technological experience that Chile is lacking.
If conditions similar to those under the Rockwood agreement, in terms of increases in production, are applied across the entirety of the salt flat, Chile could benefit from almost US$1 billion of additional financial support to 2035.
“According to the royalty or research contributions that have been estimated by Rockwood on the basis of a total production of the entire salt flat of around 380,000 tonnes a year and at a price of US$10,000 per tonne, the Chilean State could receive about US$900 million of additional financial support a year to 2035”, says Bifran.
In addition, private calculations provide evidence of interesting niche segments in which there is space for growth in terms of increasing the purity of lithium carbonate; for example, from 99.3% at a reference price of US$7,000 per tonne to 99.99% at a reference price of US$18,000 per tonne, according to Mario Grágeda.
The maximum purity of commercial lithium carbonate produced in Chile is that which relates to battery grade, i.e., 99.5%. Subsequently, once this is exported to countries such as China its purity level is raised up to EV-grade plus, i.e., 99.99%, making it sufficient for use in electric vehicle batteries. Grágeda contends that the purity in Chile is not sufficient for electric vehicle batteries since current grades may affect the performance of their charging capacity and, as such, the country is not competing with the very best manufacturers.
In general, Daniela Desormeaux believes that a more developed industry across the board offers a number of positive externalities in terms of innovation, such as having knowledgeable scientists in the country, as well as bringing about conditions conducive to the creation of new clusters, industries and technologies.
Production and competiveness
A further aspect that is of particular importance to relevant players is to enhance the production processes of lithium compounds, as well as to improve the purity and sustainability of the mineral extracted.
Accordingly, the Chilean player SQM states that it has overseen significant technological developments in terms of both understanding lithium and building up related production processes. This is in addition to having invested over US$1.7 billion in the productive and technological development of the Atacama salt flat.
Furthermore, the company is overseeing a production increase to 13,500 tonnes of lithium hydroxide, which includes the construction of a new plant at the Salar del Carmen site, located close to Antofagasta. SQM estimates that this process will conclude by the end of 2017.
Daniela Desormeaux explains that alternative technologies in general are being developed to stem evaporation, as well as to produce lithium hydroxide directly from the raw material extracted from the salt flat (lithium chloride and brine solution), without having to pass through the stage of lithium carbonate, which is more expensive.
Moreover, industry players agree that an additional factor that must not be overlooked is keeping track of their competitors.
Regarding the so-called ‘ABC triangle’ (in relation to the area of lithium deposits located between Argentina, Bolivia and Chile), Emilio Bunel, director of the Chemical Sciences and Engineering Division at the US-based Argonne National Laboratory, states that the value added of lithium has not yet been successfully increased. This, he claims, is due to the fact that the mineral is only exploited as a natural resource because the United States and countries in Asia have been able to incorporate it into the supply chain for manufacturing batteries for electric vehicles and electrical devices or those for controlling and regulating electricity networks.
In particular, Argentina has generated a noteworthy synergy between the public and private sectors and academia to produce lithium batteries. Projections from that country state that in 2018 operations will begin on the country’s first lithium battery factory, thanks to financial support from the Argentinian energy company, YPF.
In Bolivia, the government has purchased a plant from China in which to produce lithium-ion batteries for use in cell phones and electric vehicles. At present, the country only assembles batteries with products bought from Chile and does not, as yet, manufacture commercial batteries. “They (the Bolivians) are undoubtedly learning, but they are still not producing value added to the products they are assembling”, states Bunel.
In Spain, IK4-CIDETEC, an alliance between different technology centers from across the Basque Country, is focusing on manufacturing lithium-ion batteries for which, “it buys all the components and (subsequently) optimizes the assembly”, according to Mario Grágeda.
In the United States, not only academia, but also industry and national research laboratories that are dependent on the country’s Department of Energy, are making progress in energy storage. Simultaneously, the federal government is fostering marketing projects and the optimization of more conventional lithium batteries.
Consequently, while developed nations are advancing in the field of battery manufacture, Chile, in particular, is beginning to take the first steps in tripartite alliances that will enable the country to meet the global lithium demand. There are a number of opportunities to grasp, but it is first essential to overcome the challenges posed by research, new technologies and human capital in order to create an industry that is relevant to the present times.
A ‘non-concessional’ mineral
In the 1980s, the Chilean Government modified its mining legislation and categorized lithium as ‘non-concessional’, due to the mineral’s status as ‘strategic’. This status meant that lithium could only be produced by the State or by State companies such as Codelco, which owns 18% of the Maricunga salt flat and 100% of the Pedernales salt flat.
From the perspective of certain players in this field, the legal restrictions on the exploitation of lithium generate obstacles that impede additional market entry. If, according to this line of thought, the country wishes to remain competitive in the industry, authorities will have to take steps to open up the market.
Furthermore, for the areas protected under the conditional concession framework, the State has failed to implement any procedures to engage with private entities in order to exploit the resource in line with legal standards. To date, there has been only one, unsuccessful, bidding process to that end for a ‘Special Lithium Operating Contract’ (CEOL), in 2012.
Under the government’s new lithium policy, in 2016 Codelco initiated a search for a strategic partner to exploit the mineral in the Maricunga salt flat, the selection of which should be finalized via a tender process during 2017. The call for expressions of interest has concluded and what remains is the final decision from the CChEN and the subsequent awarding of the CEOL permit to exploit the resource.