Chile to bring lithium under state control

Briefly: Chile’s president Gabriel Boric has announced plans to place the country’s lithium sector under state control. Its Atacama region supplies nearly a quarter of the globe’s lithium, second only to Australia.

Lithium is a white metal that’s critical for batteries used in the energy transition. And under Chile’s new rules, any company seeking to mine Chile’s lithium will have to partner with a new state-owned firm that’ll have a controlling share.

Boric says he’ll honour existing contracts with the two lithium miners already in Chile, but hopes they’ll “negotiate” a role for the state before their contracts expire. And that does feel a little like the iceberg offering to “negotiate” with the Titanic before impact (shares in both miners sank accordingly).

The plan still requires approval from Congress, which Boric doesn’t control.

Intrigue’s take: It’s easy to see this as yet another leftist leader nationalising an industry. But the trend is bigger (and more important) than that:

  • Multiple emerging markets are now using export bans or nationalisation to assert state control over key resources
  • And advanced economies are using critical minerals strategies to assert control over key resources and dilute China’s presence

This is all partly about countries scrambling to secure resources for the energy transition. But again, it’s also bigger than that: it’s about our world getting more volatile, and countries holding tighter to anything that gives them leverage.

So something tells us this trend won’t stop with Chile, nor with lithium.

Also worth noting:

  • Argentina, Bolivia, Chile and Mexico have variously floated the idea of an Opec-style lithium cartel to co-ordinate on production and pricing.
  • Chile’s track record with state-owned resource companies is better than the regional average: its Codelco is the world’s largest copper miner and has a relatively strong reputation.