Recently, a source in the Argentine Ministry of Foreign Affairs revealed to Spain’s Agencia EFE that Argentina, Bolivia and Chile are working to promote the establishment of a “Lithium Triangle OPEC” similar to the Organization of the Petroleum Exporting Countries (OPEC) to reach a “Lithium Triangle OPEC” in order to reach a “price agreement” in the event of fluctuations in lithium prices.

The source said the future price of lithium is highly uncertain due to its frequent volatility. Therefore, the foreign ministers of the three countries are preparing a document to establish an OPEC-like “Lithium-OPEC”.

As we all know, OPEC is a cartel of oil-producing countries that sets oil production levels to affect the price of a barrel of oil. With the same idea, the foreign ministers of the three countries hope that the three countries can agree on the price of lithium ore and coordinated production, and set guidelines for the sustainable development of the industry and the development of related technologies.

In addition, the foreign ministers also believed that if Argentina, Chile and Bolivia reach a consensus first, the organization can also absorb the participation of global lithium-producing countries such as Australia in the future.

Since July this year, the three foreign ministers have been negotiating a joint statement to be submitted to their respective presidents. This week, two meetings of foreign ministers of the Community of Latin American and Caribbean States (CELAC) will be held in Buenos Aires, Argentina, and the process of building a “Lithium-OPEC” may accelerate.

It is understood that Argentina, Bolivia and Chile form the so-called “lithium triangle”, and the lithium mineral resources of the three countries account for about 65% of the world’s lithium mineral resources. The lithium resources of the three South American countries are dominated by salt lakes, most of which are salt lakes with low magnesium-lithium ratio (magnesium-lithium ratio is lower than 8).

Judging from the output of global lithium ore resources, in 2020, the global supply of lithium resources will still be dominated by ore lithium (accounting for 59%), of which Australia accounts for 55% and is the main supplier of lithium raw materials in the world. The mine production of the three South American countries reached 29.5% of the total global production.

Industry insiders pointed out that compared with the extraction of lithium from ore, the current extraction of lithium from salt lakes is characterized by low production costs, but a long production cycle and poor production capacity guarantee, which is a cornerstone resource. However, considering the maturity of the lithium extraction technology from the salt lake, the huge resource reserves of the salt lake itself, and the supply bottleneck of lithium ore, the lithium resource of the salt lake may become the main supplier in the future.

It is worth noting that the background of the acceleration of the “Lithium-OPEC” process. As early as 2011, “Lithium-OPECc” was proposed, but it is understood that due to the ideological differences between the leaders of Bolivia and Chile at the time, the relationship between the two countries was tense, and the proposal was shelved.

That changed with Chile’s left-wing coalition candidate Gabriel Boric being elected as the new president in December 2021. Today, the three countries in the South American Lithium Triangle are all left-wing governments, especially Chile, which currently has the highest degree of lithium resource development. Boric attaches great importance to the development of lithium resources, and advocates strengthening state regulation, increasing mining enterprise royalties, and promoting the establishment of state-owned enterprises Lithium companies, etc.

As of now, the Mexican lithium mine nationalization bill has been passed by both the Senate and the House of Representatives; Argentina’s Ministry of Economy announced that it will consider lithium nationalization to increase its participation in the lithium industry chain and value chain; Chile has confirmed that it will formally establish a “national state lithium Company” by the end of the year; Bolivian Lithium Company further expanded its core and peripheral businesses.

At present, the long-standing supply chain crisis and deteriorating inflation situation have greatly exacerbated the volatility of traditional energy and food prices. Commodity prices continue to rise, and Latin America has long been the gathering place of the world’s largest exporters of energy and mineral resources, and naturally becomes the main beneficiary of this wave of dividends.

At present, the traditional pattern of the four lakes in South America and the six mines in Australia has been reshaped, and traditional lithium giants such as ALB, Livent, and SQM have clear guidelines for future capacity expansion; Australian mines Talison and Marion do not sell externally; Altura, Wodgina and Bald hill mines are still shut down, and it will take time to release new production capacity and restart the shut down production capacity. In the next five years, the overall supply-side growth rate of global lithium mines will be lower than the demand-side growth rate.

In the eyes of many industry insiders, an OPEC-like lithium alliance may play a role in stabilizing lithium resource prices.

According to Chinese customs data, in August 2022, China imported 11,296 tons of lithium carbonate, up 21% month-on-month and 36% year-on-year. Split by importing country, Chile is the largest importer with 10,032 tons, and Argentina is the second with 1,039 tons. From January to August 2022, the cumulative import volume of lithium carbonate in China was 91,991 tons, a cumulative increase of 65% year-on-year.

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