South America's rich lithium resources trigger investment boom

For a long time, South America has not been a hotspot for industrial investment. Unlike in Asia, when companies invest in South America, the main objective is to penetrate the local market rather than integrate it into global trading networks. However, with the recent booming battery market and rising global lithium prices, South America, which is rich in lithium resources, has become a hotspot for investment, and a large amount of capital is pouring into this region.

The global demand for lithium is growing rapidly

Driven by the battery market, global demand for lithium has grown substantially in recent years. Lithium mainly exists in the form of lithium carbonate and lithium hydroxide, and is mainly used in positive electrode materials in lithium-ion batteries, and can also be used in electrolytes and negative electrode materials. Based on lithium, in 2020, the global lithium consumption will be 79,400 tons, and based on lithium carbonate equivalent (LCE), the global lithium carbonate consumption in 2020 will be 422,300 tons. In 2015, the global lithium consumption was only 33,600 tons, and the average annual growth rate from 2016 to 2020 reached 27%. Standard & Poor's Global pointed out that the growth rate of global lithium consumption is still accelerating. It is estimated that the global lithium demand will reach 215,900 tons in 2025, with an average annual growth rate of 34%.

The key to lithium demand growth lies in batteries. Lithium consumed in battery production has increased from 48% of global lithium consumption in 2015 to 67% in 2020 and is expected to reach 88% by 2025, S&P Global said. In 2020, electric vehicles accounted for 72% of the lithium-ion battery market, and the energy storage field accounted for only 5% of the global lithium-ion battery market, but this field is growing rapidly.

South America is rich in lithium resources

Against the background of the rapid development of the battery industry, South American countries with rich lithium resources have received more attention. According to the estimates of the US Geological Survey, there are a large number of lithium deposits under the salt lakes of Argentina, Bolivia and Chile. The three countries are also known as the "Lithium Triangle". The development potential of lithium resources in the "Lithium Triangle" area is huge. As of 2021, the total lithium resources of Argentina, Bolivia and Chile will be 49.8 million tons, accounting for 62.7% of the world's total, and the proven reserves will be 11.4 million tons, accounting for 51.8% of the world's total proven reserves.

Of the three countries, Chile has the most developed lithium industry and has been the world's leading lithium producer since the 1990s. As of 2021, Chile's total lithium resources are 9.8 million tons, of which 9.2 million tons have been proven reserves. In terms of lithium production, in the past few decades, Chile's lithium production has grown steadily, from 5,300 tons in 2000, to 10,500 tons in 2010, to 21,500 tons in 2020, and to 26,000 tons in 2021.

Argentina's total lithium resources are much larger than Chile's, with a total of 19 million tons as of 2021. However, the development of lithium resources in Argentina is far less than that of Chile. As of 2021, the proven reserves of lithium resources in Argentina are only 2.2 million tons, but a large amount of exploration work is underway. Argentina's lithium production is also far behind that of Chile, which was only 200 tons in 2000, increased to 2,950 tons in 2010, and increased to 5,900 tons in 2020.

In contrast, according to the US Geological Survey, Bolivia has the world's largest lithium resource - 21 million tons, accounting for 26% of the world's total, but development has just begun.

Capital expansion has already begun

At present, with the increasingly prominent resource advantages in South America, internal and external capital has stepped up investment and development in the local area. At present, Argentina and Bolivia, which have great development potential, are the main ones.

Chile, where lithium resources were developed earlier and more mature, currently has two lithium chemical producers. According to S&P Global statistics, SQM is the largest producer of lithium chemicals in Chile, with a capacity of 82,000 tons of LCE/year. American Albemarle is the second largest producer with a production capacity of 59,000 tons of LCE/year. At present, both producers are investing in capacity expansion. SQM plans to expand production capacity to 182,000 tons of LCE/year, and Albemarle plans to expand production capacity to 99,000 tons of LCE/year.

In Bolivia, state-owned Yacimientos de lilio bolvianos (YLB) was established in 2017 to advance a $2.3 billion project that includes a 15,000-ton/year lithium carbonate plant and a 350,000-ton/year potassium chloride plant. The lithium carbonate plant is scheduled to start production by the end of 2022. The slow start of Bolivia's lithium industry partly reflects the nature of its brines. Bolivia's brines are less concentrated and deeper than those in Chile and Argentina. The country is also landlocked and its infrastructure is underdeveloped, creating barriers to investment.

In Argentina, investment activities are in full swing. Currently, there are two companies producing lithium chemicals in Argentina, Canada's Livent and Australia's Allkem, both of which have started capacity expansion projects. Livent's Fenix project, which began operations in 1997, currently has a capacity of 26,000 tons of LCE/year, but in March this year, the company announced a $1.1 billion project to increase its capacity to 60,000 tons of LCE/year. Allkem's Olaroz plant has been in operation since 2014, with a production capacity of 17,500 tons of LCE/year. It will be expanded to 42,500 tons of LCE/year by the end of 2022, and will increase production capacity in the next two years. The total investment for the project is estimated at $425 million.

A number of new lithium production projects are under construction in Argentina. France's Eramet, which began exploring for suitable brine deposits in Argentina about a decade ago, has resumed its $600 million Centenario Ratones project. Earlier this year, the company started construction on a 24,000-ton LCE/year plant. Canada's Lithium Americas and China's Ganfeng Lithium are building a $741 million project in Cauchari-Olaroz, Argentina. In the first phase, the production capacity of 40,000 tons of LCE/year is planned to start operation in 2023; in the second phase, the production capacity of 20,000 tons of LCE/year will follow closely. In addition, four other lithium projects in Argentina are under construction, with around 60 projects in the pipeline.