STORY INLINE POST
Q: Latin America is a leading global lithium hub. How does CALBAMERICA helps its members grow and take full advantage of the industry’s potential?
A: Our main objective is to make players see the macroeconomic pillars developed in the energy transition, to which the lithium industry is essential. We now see a challenging outlook, since we do not have the capabilities to set fair prices. CALBAMERICA is looking for countries to foster demand and the conditions to make it thrive beyond creating the industry itself, without placing obstacles in front of lithium developers.
To address that issue, CALBAMERICA is pushing for the establishment of fair, transparent and visible contracts. This will allow society to see the real price of lithium carbonate and its impact on the global economy. In the region, we always discuss value but we do not set a standard for prices. This must change; if we do not set reference prices, we cannot develop sustainable business activities.
Q: How does CALBAMERICA differentiate itself from organizations like OPEC?
A: The main differentiator is the level of integration among CALBAMERICA’s members. This includes relationships between the members but also with small and medium-sized enterprises (SMEs).
We have worked on linking different players in Chile, Peru, Bolivia and Argentina. Beyond this, CALBAMERICA tries to integrate the entire Latin American region, not only lithium-producing countries, since some of them have the technology to industrialize the mineral, such as Brazil. This integration could enable the region to create an internal value chain and establish a lithium benchmark to influence the future of lithium as a resource. Today, the Shanghai and London exchanges fix the lithium price, whereas Latin America should have its own spot price for the white metal.
The chamber is pushing for a market-creation strategy rather than only controlling production. A metals market should aim to showcase visible and transparent contracts and standardize lithium in Latin America as a commodity. Contracts for both lithium carbonate and lithium hydroxide should have clear visibility for buyers and sellers to construct the value chain and provide local reference pricing for the internal market. This, in turn, should be guarded by the government in the form of a proper business environment and legal framework. Developing such a framework will make the region more competitive in the energy sector, battery production and vehicle manufacturing. At the same time, governments can benefit through export charges and receiving foreign currency, which will boost the economy.
Q: What was the result of inviting Mexico as a CALBAMERICA member?
A: We have been in touch with Mexico on several occasions but have made little progress. We planted the seed for the creation of a Mexican Lithium Chamber and met with government officials, though this mostly remained at the level of political gestures.
Furthermore, we contacted and networked with some Mexican SMEs, some of them operating with Canadian capital. This allowed us to learn about the challenges they face because they are unable to influence lithium prices.
A key challenge is the concentration of demand in places like China. For instance, on Nov. 29, 2022, in Shanghai, the price of lithium carbonate with 95% purity fell from US$87,000/t to US$31,000/t. These changes were mostly driven by speculative processes developed in these foreign markets.
Another factor to consider is the role of the government, which should support SMEs in becoming more innovative in mapping Mexico’s mineral reserves. Mexico, like all of Latin America, has the potential to develop the lithium industry. It is, therefore, important to integrate not only the region beyond the lithium triangle, comprising Argentina, Bolivia and Chile. The region should collectively discuss and innovate within the industry.
Q: How is the organization planning to coordinate different lithium extractions in the region?
A: By creating a classification model. Every country should develop a classification standard that considers the view of every country. This entails certifying the quality of lithium transformed to lithium carbonate and determining its purity. The developed standard can be used as a certification of regional quality and can be made binding in a contract where governments review processes and private companies can trade their products.
This will provide economic value by developing a regional market. Each classified lithium carbonate type, regulated and established by the government’s legal framework, can set a reference price.
For instance, in Argentina, lithium carbonate was valued at US$87,000/t in 2022 but one company in the Catamarca region sold it for less than US$10,000/t. By creating a reference price, the company could perform better economically and create more jobs, technological growth, sustainable development and a stronger commitment to the environment as well as the well-being of Indigenous peoples. Each phase of the chain must be spelled out to construct a real reference price that can benefit everyone.
Q: What opportunities or risks do you see in nationalizing lithium?
A: The process of classification articulates all the processes required to develop a value chain and positively impact the environment by ensuring safer processes. However, politicians do not see the industry this way: they often push for what I would call political feudalism, always thinking about re-election. Their plans to put lithium production in the hands of the government lack transparency. For the government, exploiting lithium salts or lithium carbonate is all the same. Classification is aimed at avoiding this since both products have different prices.
The way to go is to establish a regional reference price. Otherwise, prices will be set in other countries and then, how would we gain control over our own economy and resources?
Latin American countries are committed to decarbonization efforts and to reducing the global temperature by 1.5°C. We are all in a race against time and politicians should be aware of that while building economic models based on sustainable development.
In sum, the state should provide a legal framework that enables lithium classification, not nationalize the resource. This only monopolizes the market, takes away freedom and delays the energy transition. Politicians should also be working on developing the infrastructure for the electrification of mobility. Latin America’s population should benefit, rather than just the politicians and entrepreneurs. For instance, in Argentina, we lost over US$2.6 billion by not declaring lithium a key commodity and establishing a reference price. This is the equivalent of 7.8% of the central bank’s reserves.
Q: How will the lithium market evolve in the coming years and what are CALBAMERICA’s main objectives for 2023?
A: In the short term, the lithium market is set to grow in terms of prices, due to the electromobility trend, which will be key to tackling inflation.
Regarding CALBAMERICA’s objectives, we will continue working on adding value to the Latin American lithium market while adapting to changes in the business environment. Our main objective is to give all Latin American countries a chance to become aware of the real value of the mineral. The classification of lithium carbonate is, therefore, essential to develop both a proper market and sustainable development.