Lithium and Chile: looking back and looking forward
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ORIGINAL PAPER
Lithium and Chile: looking back and looking forward Philip Maxwell 1
&
Mauricio Mora 2
Received: 18 September 2018 / Accepted: 21 March 2019 # Springer-Verlag GmbH Germany, part of Springer Nature 2019
Abstract This paper focuses on the economic fortunes of the Chilean lithium industry over the past three decades and considers its likely future directions. When SQM commissioned its brine extraction facilities in the Salar de Atacama in 1995, joining the already established SCL (operating since 1984), Chile emerged as the world’s leading lithium producer. It retained this position until 2013 when Australian production surpassed it. Chile, Australia and Argentina now dominate the early stages of the lithium industry. Four multinational companies—Albemarle, SQM, FMC Corporation and Tianqi Lithium—accounted for more than 83% of world lithium output in 2016. These firms appear to exert considerable market power. Against this background, we outline and assess recent developments in the Chilean lithium sector, noting that the second Bachelet government (in office from 2014 to early 2018) convened a year-long National Lithium Commission in 2014. The members of this group suggested strategies to maintain and enhance Chile’s competitive advantage in the lithium sector. The final section considers the implementation of these in the light of the election of the second Piñera administration which took office in March 2018. Keywords Chile . Lithium . Collusive behaviour . Vertical integration . Horizontal integration . Value adding . Market power . Mineral policy JEL classification L0 . L1 . L720 . L11 . D430
Introduction Lithium has recently become a Bglamour^ metal. Its low atomic mass, low coefficient of thermal expansion and high electrochemical reactivity have made it a particularly attractive material for use in rechargeable batteries for consumer electronic devices, electric vehicles and grid storage systems. In a little more than two decades, lithium consumption has increased dramatically, its real price has jumped (see Fig. 1) and its supply has risen strongly. Electronic supplementary material The online version of this article (https://doi.org/10.1007/s13563-019-00181-8) contains supplementary material, which is available to authorized users. * Philip Maxwell [email protected] Mauricio Mora [email protected] 1
Faculty of Science and Engineering, Curtin University, GPO Box U1987, Perth, WA 6845, Australia
2
Nexis Consulting SPA, Santiago, Chile
In 2005, the US Geological Survey estimated the average annual real price of battery-grade lithium carbonate at around US$2 per kilogramme (at 2010 prices). By 2017, it had risen to US$13 per kilogramme (also at 2010 prices). Increasing supply in response to large profit margins finally led to falling real and nominal prices in 2018. After standing at about 40,000 t of lithium carbonate equivalent (LCE)1 per annum in 1995, annual world lithium consumption had risen to 277,000 t by 2018 (see Shabalala 2018).2 The average rate of growth in li
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