Deep in the Atacama Desert of Chile, chemical company SQM pumps saline brine from underground reservoirs into hundreds of giant rectangular pools. As the brine slowly evaporates, the liquid turns into varying shades of green and blue resembling an artist’s palette.
A liquid called lithium chloride remains, which is shipped to refineries to produce lithium carbonate and hydroxide, vital materials for lithium-ion battery production.
In recent months, Chinese engineers and businessmen have visited the plants, hinting at China’s desire to secure supplies of lithium, a key component for the high-tech industry.
It’s hard to overstate the importance of lithium in the context of current battery technologies. Lithium-ion batteries are efficient and have low self-discharge. They’re the most popular type of rechargeable battery for home electronics, mobile phones, and electric cars.
China Calling
A remote region in central South America, formed through millions of years of natural leaching from the Andes Mountains, holds one-fifth of the world’s known lithium reserves.
Chile has the world’s second-largest reserves of lithium after Bolivia. Chile has the infrastructure and logistics for lithium extraction that Bolivia currently lacks. Bolivia’s reserves reside on the eastern side of the Andes and mining companies would need to scale the Andes to reach the Pacific seaport, or trek across South America to the Atlantic coast.
A stake in Chile’s SQM—one of the leading producers of lithium, iodine, and potash—is now up for grabs through an indirect shareholder. Oro Blanco late last year invited buyers to bid for its ownership in Pampa Calichera, a Chile-based investment company. Calichera is a major investor in SQM.
China’s CITIC CLSA Capital Markets is said to have a major interest in purchasing Oro Blanco, which put itself up for sale after its owner and SQM chairman Julio Ponce, a son-in-law of former dictator Augusto Pinochet, was forced to resign after scandals, according to a Reuters report.
The groundwork seems to be in place for a potential acquisition by China. Last month, Chile Mining Minister Aurora Williams announced that the country would not block a foreign takeover of SQM.
Rising Prices
The competition for SQM is part of a global run on lithium by the world’s largest battery producers and manufacturers of cars and electronics.
The price of 99 percent-pure lithium imported to China has increased 42 percent in the last six months, according to Asianmetal.com, a website that tracks import prices of commodities.
Similarly, the value of lithium and battery producers has increased over the same period. The price per share of Global X Funds Lithium ETF, which tracks the Solactive Global Lithium Index comprising companies engaged in lithium mining, exploration, and lithium-ion battery production, has increased 26 percent over the last three months.
