Chile's CORFO has agreed to increase Albemarle's lithium production quota by 240,000 metric tons of lithium metal equivalent (LME), nearly 50% above its current allocation. Albemarle must meet environmental guidelines and consult local communities. Meanwhile, BYD postponed its $290 million lithium cathode plant plans in Chile. This juxtaposition highlights differing strategic responses to Chile's evolving regulatory landscape, with Albemarle increasing investment while BYD holds back amid concerns.
Source: Emerging Markets Business
On Wednesday Chile's economic development agency CORFO announced an agreement with Albemarle to increase its lithium production quote by 240,000 metric tons of lithium metal equivalent ("LVE"). The production boost represents an increase of nearly 50% of the current quote awarded the American company.
A contingency of the increased quota allocation is that Albermarle would have to meet environmental guidelines, consult local communities, and obtain all required permits.
The same week, Chinese carmaker BYD announced it was postponing plans to produce lithium cathodes for its EV batteries in Chile. The plan, which aimed to start production in 2025 through a factory expected to attract $290 million in investment capital, has allegedly been delayed due to regulatory uncertainties and changing market conditions.
According to Stella Li, BYD's Chilef of Americas, "the plan has been postponed because there is a lot of uncertainty."
Chile's Lithium Prospects
Chile is the world's second-largest lithium producer, contributing approximately 25% of global production. Albemarle and Sociedad Química y Minera de Chile (SQM), founded in 1968, are the two major companies operating in the country. Despite its prominent position, Chile faces challenges from competitors like Australia and Argentina.
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Albemarle is a U.S.-based producer of specialty chemicals with operations in over 100 countries. The company's major lithium production hubs are in Chile, the United States, and Australia. Albemarle entered Chile in the 1980s and has since achieved several milestones, including becoming one of the largest lithium producers in the Salar de Atacama.
Chile is presently led by a left-wing President, Gabriel Boric, who is making moves to place Chile's lithium industry further under state control. The rhetoric and maneuvers have led to Chile losing lithium market share since Boric took over in March 2022. The recent increase in production quotas for Albemarle is part of a broader strategy to regain competitiveness and prevent Chile from falling to the fourth-largest lithium producer by 2030.
BYD Making Moves in Latin America
BYD established operations in Brazil in 2015 building Latin America's first electric bus manufacturing bus facility in Campinas. The plant also produces solar panels. One of BYD's plants in Brazil was formerly owned by Ford which recently left Brazil after more than a century.
In Colombia, BYD sells electric vehicles and buses, and in Chile it wanted to manufacture cathodes and as already mentioned those plans are on hold.
BYD's entry into Latin America has sparked debates about increased economic competition. As a low-cost EV maker, BYD's expansion could disrupt local markets and potentially lead to job losses in traditional automotive sectors.
Political tensions pose challenges to BYD's ambitions in Latin America. The U.S. government is increasingly protective of its strategic interests in the region and wary of China's expanding influence. There are concerns that Chinese companies might use Latin American countries as platforms to bypass U.S. tariffs. As a result, the U.S. is expected to intensify its scrutiny of Chinese investments and may implement policies to curb potential economic and strategic advantages gained by China in the Americas.
