The Challenge to Develop the Lithium Industry in the World's Biggest
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THE CHALLENGE TO DEVELOP THE LITHIUM INDUSTRY IN THE WORLD’S BIGGEST LITHIUM DEPOSIT – A ROADMAP FOR THE TRIANGLE COUNTRIES by Ricardo N G Araujo A capstone submitted to Johns Hopkins University in conformity with the requirements for the degree of Master of Science in Energy Policy and Climate Baltimore, Maryland December 2020 © 2020 Ricardo N G Araujo All Rights Reserved Abstract This paper addresses the challenge that the lithium triangle countries have to add value to the lithium chain. Despite having the largest global lithium reserves and medium levels of development, Chile, Argentina and Bolivia are only exporters of raw materials. The work focused on two approaches: to consolidate the triangle countries as lead producers of raw material, and to develop strategies to add value to lithium production. For this, a vast array of material from different sources was collated and analyzed approaching different angles of the lithium industry and its Global Value Chain. With regards to the challenge to consolidate the triangle countries as leading raw material producers, these countries must improve water use in the brines' fragile ecosystems and include the affected populations in the generation of wealth from lithium mining. The challenge to add value to the lithium chain is more complex. In this context, the triangle countries should create synergies to define policies and strategies and pursue partnerships with other countries in the region to advance lithium's industrialization to produce LIB and even EVs in South America. Mentor: Peter Saundry ii Acknowledgements Here I present extend heartfelt acknowledgements to my mentor of this Capstone Project, Dr. Peter Saundry, as he keeps providing invaluable comments and advices on both the structure and content details of this article from start to end. I also want to appreciate Dr. Daniel Zachary who organize the EPC Capstone Project in this semester thus I have the opportunity to finish this article. And many thanks to my instructors and classmates who provide me quite amount of inspiration and help in all courses I have attended during my EPC study. iii Table of Contents Abstract ..................................................................................................................................... ii Acknowledgements ................................................................................................................. iii Introduction .............................................................................................................................. 1 Methodology ............................................................................................................................ 2 Background ............................................................................................................................... 3 A- Lithium Background .......................................................................................................... 4 1- Lithium Reserves ........................................................................................................... 4 2- Lithium Production ........................................................................................................ 7 3- Triangle Countries Mining Sector Background .............................................................. 8 B - The Global Lithium Market ............................................................................................... 10 1- The Lithium Value Chain ................................................................................................. 11 2- Lithium Flows .................................................................................................................. 12 3 – A Brief Background on the Lithium Market and Demand Growth ................................ 15 C - Policies to Promote the Lithium Chain ............................................................................. 17 1- Global Value Chain Determinants ............................................................................... 17 2- A briefing on countries strategies to improve Global Value Chain ............................. 20 D – Policies and Chain bottlenecks in the Triangle Countries ............................................... 24 1- A brief look at the Triangle countries policies ............................................................. 25 2- Upstream - Brine's sustainability: social and environmental concerns .......................... 26 3- Middle and Downstream - Reasons for the failure of Chilean policies ........................... 27 Recommendations for Triangle Countries Strategic Approach ............................................ 31 1- Triangle Countries Lithium Institutional Body............................................................. 31 2- Creation of environmental and social seal (seals and certification) ............................... 32 3- Triangle Countries Lithium Laboratory ........................................................................... 33 4- Developing an EV market in South America ................................................................... 33 Conclusion ............................................................................................................................... 34 References .............................................................................................................................. 36 Biographical Statment ............................................................................................................ 40 iv List of Tables TABLE 1- RESOURCES OF LITHIUM MINING AND BRINE DEPOSITS ................................................................................. 6 TABLE 2 - TOP LITHIUM MINING COMPANIES ........................................................................................................... 7 TABLE 3 - INVESTMENT ATTRACTIVENESS INDEX ..................................................................................................... 10 TABLE 4 – GLOBAL CHAIN FACTORS .................................................................................................................... 17 TABLE 5 - BATTERY ELECTRIC CAR BY COUNTRY ...................................................................................................... 29 TABLE 6 – MONETARY INCENTIVES PROMOTING EV SALES ....................................................................................... 30 List of Figures FIGURE 1: LITHIUM TRIANGLE COUNTRIES .............................................................................................................. 5 FIGURE 2: MINING INCOME ................................................................................................................................ 9 FIGURE 3: CHINA’S SHARE OF AUSTRALIA UNPROCESSED MATERIAL ........................................................................... 13 FIGURE 4: CHILE’S BRINES PRODUCTIONS ............................................................................................................. 14 FIGURE 5: LITHIUM DEMAND............................................................................................................................. 16 FIGURE 6: CARBONATE X HIDROXIDE DEMAND ..................................................................................................... 29 v vi Introduction At a time when humanity is undergoing major transformation in the world's energy matrix, lithium has gained great importance in energy transition. Long-term access to lithium chemicals is essential for the global battery industry that supports the expansion of electric vehicles (EVs) and energy storage from renewables. Lithium-ion batteries’ (LIB) drive the world’s largest and fastest-growing lithium use today. The transition to electric vehicles and renewable energies requires a considerable expansion of battery availability and storage capacity. Lithium chemicals, especially lithium carbonate and lithium hydroxide, are the raw materials needed to create cathodes because they have a high energy density, allowing more energy to be stored. The so-called triangle countries (TCs) composed of Argentina, Chile, and Bolivia make up about half of the planet's lithium deposits (USGS, 2020). They compete with Australia for leadership of lithium exports, predominantly to the Asian market. The purpose of this work is to propose strategies to develop the lithium industry in the triangle countries (TCs) based on these two approaches: to consolidate their leadership as exporters of lithium concentrate and to add value to this wealth. To this end, the work has been divided into four parts. The first chapter provides primary data about lithium resources and its production, and sheds light on the mining sector that plays an essential role in the lithium upstream sector. The second chapter discusses the lithium market to understand the lithium Global Value Chain (GVC) and the challenges that the triangle countries face to add value to their production. By analyzing 1 this oligopolistic market, it is possible to infer that China, South Korea, and Japan could be called the "triangle countries of lithium-ion batteries" or the holders of the lion's share within the lithium GVC. The third chapter discusses policies and determinants that have contributed to participation in the global market. Finally, the fourth chapter analyzes the challenges for the triangle countries to consolidate leadership in the supply of raw materials and to add value to their production.