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C3S Overview: China in Latin America: Quest for Lithium

Updated: Nov 16, 2023

Contributors: R Madhumitha, Anamika Nair, Harsh Pargat

Image Courtesy: Forbes


Article: 38/2023


This Century’s Gold Rush


Easily mistaken for table salt, Lithium is a soft silvery white alkali metal. Lithium is highly reactive and not easily found in nature, a rare earth element. There are multiple uses of Lithium, and it is essential to the global economy. Lithium and rare earth minerals are key to manufacturing wind turbines, defense technologies, rechargeable batteries for cell phones, laptops and electronic vehicles. Lithium-ion batteries are critical in different sectors, particularly for energy storage, nicknamed “White gold.” Other minerals that are found in Latin America, like Copper and Nickel are also emerging as central to the energy transition, which intensifies the popularity of Latin America as an investment destination. Demand and price indicators, and the projections for the same have shown increased need for demand and supply: The global Lithium demand is said to increase globally to 1 million metric tons by 2025. According to the United Nations Development Programme, Lithium prices have doubled in the last two years. The price of battery grade Lithium carbonate has increased six-fold from the first half of 2021 to 2022 end. Between 2021 and 2030, the consumption of Lithium is projected to increase by 300%.

Latin American countries have been endowed with Lithium reserves and are among the top ten producers of Lithium globally. 60% of all identified Lithium sources are from Latin America, and Argentina, Bolivia, and Chile supply 38% of the world’s lithium, home to 58% of global Lithium reserves. Hence, these countries are known as ‘Lithium Triangle Countries’ (LTCs). Recently, Australia has joined these countries, surpassing Chile in production, making it a quad. LTCs produce lithium from salt brines, which is costlier than extracting the metal from hard rock deposits. The LTCs therefore have a competitive edge, in anticipation of high demand for EVs and green energy. However, in terms of the value chain of trade, pure extraction and export of Lithium is not very profitable for the host country. Mining of Lithium is generally very expensive, and marginal costs of producing Lithium (both hydroxide and carbonate) are very high. The investment outlay is high to produce Lithium of battery grade quality, which is why mining of Lithium has been concentrated in few countries with the sources. However, the supply of Lithium is supposed to increase, as more countries are beginning to identify sources.




There has been an increase in the demand for Lithium, since Lithium is an alternative to petroleum fuels, an essential component for electronic vehicles which is an emerging technology along with it providing sustainable viability.

Over the past years, Chinese mining companies like Ganfeng, Tianqi, and Zijin have either gained partial or full access to mineral mines across the world, including Latin America. China is dominating mineral markets worldwide, and white gold is no exception to this trend. Chinese companies have purchased half of the world’s largest Lithium mines in the market since 2018. China also follows the strategy of investing in junior mining companies, companies that are at nascent stages with low asset bases are funded by Chinese financiers. Joint ventures with Western companies and local companies are also a part of China’s strategy. Australia, the United States, Canada are emerging as significant players in the region. One of China’s major advantages in the region is also that other Asian giants like Japan, South Korea and the European Union have not quickly taken to investing in the region, despite having highly developed and competitive automobile industries. Another significant advantage is that China is at the top of the value-addition ladder, controlling over 90% of Lithium refining capacity. However, with the recent rhetoric around de-risking supply chains, Australia and other countries are attempting to set up their own refinement processes. However, as of now, China is undoubtedly a dominant player in the region.


China in the Lithium Triangle: Loans, Investment, Extraction


China has developed a significant foothold in Latin American countries. Between 2005 and 2017, China has had the highest foothold in Brazil, Argentina, and Peru - countries that are rich in other critical minerals that form the supply chains essential for energy transitions and battery productions. Chinese companies significantly hold stake in six of the nine lithium production projects in Argentina. In Argentina, Chinese involvement gradually increased in the 21st century. China’s strategy of entering Latin American markets as a prominent player has developed through this century. China began to engage on a government-to-government basis, providing countries with loans, committing them to contracts with Chinese companies for the development of infrastructure and energy projects.


China has struck deals for the development of renewable energy based projects in Latin America, spending millions of dollars into hydroelectric projects or solar parks. Latin American countries often do not have access to conventional credit, which makes it easy for China to make engagements with these countries in terms of loans. In Latin America, the articulation of the debt-trap and heavy indebtedness of recipient countries has not taken much root, making them more open to Chinese investment. It has entered the market through investments from state-owned enterprises; Chinese companies significantly hold stake in six of the nine lithium production projects in Argentina. For instance, some major projects:


- $2.2 billion investment in lithium mining projects from Chinese mining company Tibet Summit Resources Co. Ltd.

- 50,000 and 100,000 tons of lithium, from projects in the Arizaro and Diablillos salt flats located in Salta province.

- Ganfeng Lithium, the largest Chinese lithium producer and one of the main players in the global lithium market, plans to start operations soon in the Cauchari-Olaroz deposit, as the majority stakeholder in the operation.

- A consortium formed by Chinese companies Contemporary Amperex Technology Company Co. Ltd (CATL), Tianqi Lithium, and Gotion High Tech, for the production of lithium batteries in Santiago del Estero.


Chile, although now second to Australia is home to low-cost, high quality Lithium. It was seen as the leader of the Lithium triangle. In Chile, Antofagatsa, Chinese companies are investing in a Lithium Industrial Park. Tsingshan Holding Group, Rupia Energy, Battery Tech, and FoxESS will participate in this. “To begin with, we know that our investment will exceed $2 billion,” John Li, vice-president of Tsingshan Holding Group, told Chilean newspaper El Financiero. For its part, Chinese company Tianqi Lithium acquired in 2018, 24% of Sociedad Química Minera de Chile (SQM) to export 80,000 tons of lithium to Chinese company BYD for seven years. As announced by El Financiero, the offer has amounted to $6 billion and the company’s sales soared 144 percent, attributed to the EV market boom in China, making China the leading buyer of Lithium from Chile.


China’s engagement with Argentina and Chile through the Belt and Road initiative has also significantly contributed to the wind and solar boom in Latin America. See here to view the energy projects in these regions that are all almost renewable based. There is a significant amount of synergy and interconnectedness between the markets. The significant funds from these projects are used to develop green hydrogen based technology in countries like Chile, that could emerge as serious competitors to Lithium mining. It can also contribute to the process of production of Lithium, with small startups in Chile attempting to innovate in Lithium production through solar energy. Latin America is also a global leader in the adoption of renewable energy, and having control over extraction and refinement to make sophisticated energy storage systems may be the logical next demands and steps of the countries.


Unlike Chile and Argentina, Bolivia is still untapped territory; for China, and the rest of the world. Bolivia holds the world’s largest lithium resources, but does not have the means to locally develop them. Thus, using Lithium extraction technology in Bolivia will be a very attractive opportunity for battery manufacturers, considering the vast resources of untapped Lithium. Other countries have attempted to tap Bolivia’s resources, but have run into hurdles in purification of the brine, or challenges with the government. In 2021, Bolivia opened the bidding process to extract lithium in three of its major salt flats, and 20 companies entered the bid, with 6 companies shortlisted, four of these companies are Chinese. In January 2023, the Chinese consortium CATL BRUNP & CMOC (CBC) signed a contract with the Bolivian government for a 1 billion dollar investment for the construction of two lithium carbonate plants for direct lithium extraction (DLE) in the Uyuni and Coipasa salt flats.


Local Impact

Latin America has had to lower its environmental and social regulations to attract Chinese investments. Across different projects, and mining too, environmental and social concerns have raised their heads. One of the major concerns with the mining of Lithium in Latin America is the environmental and local impact of mining operations. Lithium production in Latin America is based on salt brines, and the water quality of this ecosystem that sustains several local communities. These water basins also host biodiversity that thrive on the equilibrium maintained between sweet and brackish water, which is disturbed due to mining activities. If companies use Direct Lithium Extraction processes, they would be able to extract Lithium without too much use of water, which would reduce the impact on the fragile ecosystem. Another major trend that may take off in Latin America is the urge to nationalize Lithium extraction and refinement. Chile, a leader in the region, has declared that it hopes to create an economy that would increase local employment. It aims to extract and refine Lithium domestically, and some Chinese companies are building local battery factories and meeting some demands of the government.


The development of the Lithium environment in Latin America will be highly dependent on how Chile and other actors delineate the role of the government and private parties to maximize local benefit and fair trade. The entry and role of other competitors like the EU, Japan and South Korea may also be a gamechanger.


(The author Ms. R Madhumitha is a Research Officer at C3S . Ms. Anamika Nair & Mr. Harsh Prashant Pargat are Research Interns at C3S, have contributed to the article. The views expressed are those of the author and does not reflect the views of C3S.)


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