Questions loom over Mexico's lithium regulator, strategy

With the deadline to name Mexico's state lithium company having passed, questions are growing over the country's plans to produce the mineral.

President Andrés Manuel López Obrador (AMLO) has made government control over the lithium industry a top priority in the last year.

By mid-April he had pushed congress to nationalize the reserves of the soft-white metal and on April 20 published a fast-track timeline in the federal gazette, giving 90 days to set up the state-owned lithium company.

That deadline passed last week without any announcement, and with that goal still unmet, officials have until August 25 to establish up the regulator that will be responsible for supervising the exploration, exploitation, processing and use of lithium.

With respect to the regulator, lawmakers in the president’s Morena party have suggested calling the agency AMLITIO (Mexican lithium agency) and incorporating the regulator into the energy ministry, rather than the current mining regulatory apparatus.

Meanwhile, AMLO is rushing to bring Mexico into the regional value chain, as key producers eye a potential trade bloc in the pipeline.

Mexico is not a major lithium producer, but this is set to change when Ganfeng Lithium begins operations at its US$420mn Sonora project, expected in 2H24.

But with the nationalization of lithium, the future has become blurry.

Lithium companies reacted with trepidation, claiming that the nationalization dealt a major blow to investor confidence across the mining industry, while mining executives added that the shock move will continue to undermine spending in the sector in the near term.

“One would think the federal government would look at that [Pemex] and say maybe we’re not so good at running these extractive industries, maybe we should let industry do it,” James Anderson, CEO at silver-focused Guanajuato Silver, told BNamericas.

TRADE DOUBTS

Looking at the market, there is little trade data upon which to build sector oversight. For example, an investigative report from Mexican daily 24-Horas found the economy ministry wholly lacking any trade data on the mineral.

The paper, however, conducted a search online to find a report with the economy ministry logo entitled “Profile of the lithium market” with information from 2008 to 2018, suggesting the report may have been discarded by the current administration taking power in late 2018.

A separate academic research document covers lithium trade data from 2006 to 2016, with coinciding data, 24-Horas reported. Using that information, it determined that Mexico would likely be running a lithium trade deficit at least in the short term.

In 2018, 195,079kg of lithium carbonate was imported and 36,401kg was exported, according to the document. Exports were even lower in previous years, with only 40kg exported in 2017 and 3kg in 2016.

Imports, conversely, exceeded 200,000kg every year from 2008 to 2017.

REGIONAL MOVEMENT

Last week at a meeting in Buenos Aires, Argentina’s foreign minister Santiago Cafiero and his Chilean counterpart Antonia Urrejola agreed to discuss the best way to jointly develop the lithium value chain, from extraction to manufacture of batteries.

But local outlet Mexico Business News has reported that no other country has been invited to the talks.

However, AMLO is already touting communication with the governments of all three nations, looking to jump into the discussion of regional lithium development. 

Not only are Chile, Argentina and Bolivia neighbors, the three countries are thought to host some 56% of the world’s lithium resources.

Latin American think tank (CELAG) estimates that if potential Peruvian, Mexican and Brazilian reserves are added, the region would control over 68% of global reserves of the metal.

As the need for energy storage and lithium-ion batteries grows rapidly worldwide, CELAG further envisions a bloc of lithium exporters akin to OPEC, in this case called OLEC.

While the latter three countries are seen as having smaller deposits, their participation is also seen in a financial, technological and manufacturing capacity.

A strong proponent of using state-owned enterprises to spur development, AMLO sees Chile, Argentina and Bolivia as partners experiences could align in a state-driven regional model for lithium exploitation.