Chinese presence in South America's lithium triangle causing geopolitical tension

Chinese investments in projects in South America’s so-called lithium triangle are generating geopolitical tension as nations around the world look to ramp up the electrification of their economies and ensure sufficient supplies of the metals and minerals needed.

The lithium triangle is a strategically important area covering parts of northern Argentina and Chile, and southern Bolivia. It is thought to contain 50-80% of total world resources of the valuable white metal.  

Chinese mining companies Tibet Summit, Ganfeng Lithium, Tsingshan and Zijin Mining are sinking millions of dollars into the Argentine lithium industry, while in Chile Tianqi Lithium made lengthy efforts to secure antitrust approval of a deal to buy a big stake in lithium player SQM and BYD is set to build a first cathode plant. In Bolivia, meanwhile, Chinese consortium CBC, Citic Guoan and Tbea Group are advancing with the incorporation of direct extraction technologies to step up production from lithium brines.

"The heavy presence of Chinese companies in the Argentine lithium industry has geopolitical implications, especially in the relationship with the United States, reaching levels of risk," Marina Pera, associate analyst at consultancy Control Risks, told BNamericas.

There is a certain amount of competition between the US and China for Argentine lithium. In the first four months of the year, China was the destination of 28% of Argentine exports of the soft metal, while the US accounted for 13% of the shipments, according to data from the economy ministry.

In Chile, the new national lithium strategy has created a different challenge. "The primacy of the State will represent a risk for private companies given the possibility of political interference in decisions that should be technical," said Leandro Lima, senior analyst for the Southern Cone at Control Risks.

Although China is currently the world's third biggest lithium producer after Australia and Chile, it does not produce enough to maintain its leadership in the manufacture of lithium-ion batteries and electric vehicles (EVs) and must therefore shore up supplies from elsewhere, particularly South America.

The rapid expansion of electrification in China and increased manufacturing of goods and components required for the energy transition has meant that its demand for lithium is growing at 10% a year, according to Chilean copper commission Cochilco.

China already exerts significant control of supply chains of critical minerals and its increasing presence in the lithium triangle is ringing alarm bells in countries like the US, Australia and Canada. 

The US in particular has drawn up a strategic plan to limit its dependence on China and signed an agreement with Australia to establish bilateral collaboration in the energy transition of the two countries.

Meanwhile, late last year the Canadian government ordered Chengxin Lithium and Zangge Mining to withdraw their investments in Canadian miners due to concerns about national security and supplies of critical minerals as it enacted restrictions on foreign investment in crucial raw materials used in mobile phones, electric cars, solar cells and other technologies.

Chinese mining firms in Argentina

Tibet Summit, Ganfeng and Tsingshan have all spent significant amounts in Salta province in northwest Argentina. The former plans to invest US$2.2bn to produce battery-grade lithium carbonate in the Salar de Diablillos and build a plant in Salar Arizaro, hoping to begin production in 2024.

Meanwhile, Ganfeng owns the Mariana project, which is targeting output of 20,000t/y lithium chloride (10,000t/y lithium carbonate equivalent, LCE) in a first phase, the company said in its annual report. It also acquired the Lithea mining group for US$962mn and bought the rights to the Pozuelos-Pastos Grandes salt flats to produce lithium.

Tsingshan owns 49.9% of the Centenario Ratones project in Salta and announced it will double its investment to increase production to 50,000t/y LCE from 2024.

In Jujuy province, Ganfeng is the majority partner in Caucharí-Olaroz, whose US$979m project has started up and is aiming at 40,000t/y of battery-grade lithium carbonate starting in 2024, with plans for further expansion.

Zijin Mining also began construction of a plant in Tres Quebradas in Catamarca province, with an investment of US$380mn to produce 20,000t/y of LCE in an initial phase, and again with the intention of expanding operations in the near future.

Chinese firms in Chile

Tianqi holds a 25.9% stake in Chile's SQM and has tried to expand its influence in the producer. However, Chile's antitrust agency FNE has rejected that because it considers that Tianqi's access to SQM's commercial information is a risk.

Tianqi's significant participation in the international lithium market, together with its partnership (Talison) with leading US company Albemarle, which like SQM produces in the Salar de Atacama, has also not gone unnoticed.

The combined production of SQM, Tianqi and Albemarle accounted for 50-60% of global lithium carbonate production last year, according to figures from Benchmark Intelligence Mining cited by the FNE. Although that proportion will decline over the next two years, the three companies' lithium hydroxide production is set to rise in the same period to a maximum of 40% of world output, the FNE said. 

The local subsidiary of BYD, a giant in EV production, was the first to win a tender held by state development agency Corfo. As a result, it will receive over 11,000t/y of lithium carbonate from SQM at a preferential price until 2030 in exchange for building a lithium cathode plant in Antofagasta region with capacity of 50,000t/y. At least US$290mn will be invested and it is part of the aim to add value to lithium production under Chile's new national strategy.

Chinese entry into Bolivia

CBC agreed with state-owned Bolivian company Yacimientos de Litio Bolivianos (YLB) to install two industrial complexes with direct extraction technology in the Coipasa salt flat in Oruro department and Uyuni salt flat in Potosí department, the government announced. 

Citic Guoan and Tbea Group were also chosen by the government in a tender to provide technology that will allow the acceleration of production and industrialization of lithium from Bolivian brines, according to a statement issued by YLB.