Identifier
Created
Classification
Origin
09SANTIAGO252
2009-03-17 12:20:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy Santiago
Cable title:
CHILE'S LITHIUM: WORLD'S LEADING PRODUCER EXPANDING
how-toVZCZCXRO1584 PP RUEHAST RUEHHM RUEHLN RUEHMA RUEHPB RUEHPOD RUEHTM RUEHTRO DE RUEHSG #0252/01 0761220 ZNR UUUUU ZZH P 171220Z MAR 09 FM AMEMBASSY SANTIAGO TO RUEHC/SECSTATE WASHDC PRIORITY 4654 INFO RUCNMER/MERCOSUR COLLECTIVE RUEHQT/AMEMBASSY QUITO 2244 RUEHZN/ENVIRONMENT SCIENCE AND TECHNOLOGY COLLECTIVE
UNCLAS SECTION 01 OF 02 SANTIAGO 000252
STATE FOR WHA/BSC, WHA/EPSC AND OES/ENV
SENSITIVE
SIPDIS
E.O. 12958: N/A
TAGS: ECON ENVR EAID EAGR ECON ETRD TBIO CI
SUBJECT: CHILE'S LITHIUM: WORLD'S LEADING PRODUCER EXPANDING
CAPACITY TO MEET GLOBAL DEMAND
REF: LA PAZ 267
UNCLAS SECTION 01 OF 02 SANTIAGO 000252
STATE FOR WHA/BSC, WHA/EPSC AND OES/ENV
SENSITIVE
SIPDIS
E.O. 12958: N/A
TAGS: ECON ENVR EAID EAGR ECON ETRD TBIO CI
SUBJECT: CHILE'S LITHIUM: WORLD'S LEADING PRODUCER EXPANDING
CAPACITY TO MEET GLOBAL DEMAND
REF: LA PAZ 267
1. (SBU) SUMMARY: Chile is the leading lithium chemical producer in
the world. Two companies, Sociedad Qumica y Minera de Chile S.A.
(SQM) -- the world's biggest producer of iodine and lithium -- and
Chemetall of Germany, dominate the production of lithium carbonate,
largely by exploiting brine sources in Chile. In 2008, SQM produced
95,400 MT of lithium, which is 30 percent of the world market share,
and Chemetall supplied about 28 percent. SQM, which expanded its
lithium carbonate capacity in 2008 from 30,000 to 40,000 tons/year
in 2008, plans to expand production capacity further in 2009-2010 to
meet growing lithium demand. End summary.
Chile Replaces U.S. as Leading Producer of Lithium
-------------- --------------
2. (U) For almost 50 years, the United States dominated the world
lithium market, and North Carolina used to be the largest U.S.
producer. In the mid-1990s, Chile became the leading producer of
lithium -- the lightest metal with physical properties that make it
well-suited to store energy. Lithium has become a key part of
rechargeable batteries, particularly those used in consumer
electronics.
3. (U) Chile began producing lithium carbonates in 1984. After the
discovery that Chilean brines were a lower-cost source and Chilean
operations cut prices to gain market share, North Carolina's lithium
mining operations closed in 1998. Today the only active lithium
plant in the U.S. is a brine operation in Nevada, which produces an
unknown proprietary amount of the metal.
4. (U) Despite being an abundant metal, economically viable lithium
deposits are not plentiful. Along with Bolivia, which faces
significant infrastructure and political challenges to developing
its lithium resources, Chile has the most extensive lithium reserves
in the world. According to the U.S. Geological Service (USGS),
Bolivia has an estimated 5.4 million tons of lithium, Chile has 3
million tons, China has 1.1 million tons, and the U.S. has about
410,000 tons. USGS estimates that Chile's Salar de Atacama contains
approximately 27 percent of the world's reserve base of the metal.
5. (U) Chile is particularly well positioned to take advantage of
recent demand increases for lithium. The battery industry doubled
its consumption of lithium carbonate between 2003 and 2007, and some
analysts are predicting double-digit annual sales growth for lithium
carbonate for at least the next three years. In addition, lithium
ion (Li-ion) batteries are gaining in popularity for defense,
automotive, and aerospace applications due to their high energy
density. Li-ion batteries may be adopted by the global automobile
industry as it transitions to more electric vehicles.
Two Companies Dominate Lithium Market
--------------
6. (U) Two companies, Sociedad Qumica y Minera de Chile S.A. (SQM)
-- the world's biggest producer of iodine and lithium -- and
Chemetall of Germany, through its Chilean branch called La Sociedad
Chilena de Lithio, dominate the production of lithium carbonate by
exploiting brine sources in Chile. In 2007, Chile exported 41,125
tons of lithium carbonate, as well as small amounts of lithium
hydroxide and lithium chloride. Reflecting a production increase in
2008, SQM alone produced 95,400 MT of lithium in 2008 -- 30 percent
of the world market share and all of it from Chile. A close second,
Chemetall, which mines lithium from both the U.S. and Chile, had
about 28 percent of the world market last year.
Lithium is a Material of "Nuclear Interest"
--------------
7. (U) Lithium is regarded as an issue of national security.
Despite huge investments in their mining operations in northern
Chile, neither company owns Chile's lithium reserves. This is
because lithium is regarded as a "material of nuclear interest" and
is regulated by Chile's Nuclear Energy Commission (CChEN),which
owns/controls the reserves. Under Chilean law, lithium concessions
are handled outside the general system for granting mining
concessions, and are subject to a special administrative concession
system.
SQM Increasing Lithium Production Capacity
--------------
8. (U) SQM started operations in Chile in 1996 and, as of December
2008, held rights to exploit the mineral resources of 197,000
hectacres in Salar de Atacama. Although the total reserves of Salar
de Atacama are unknown and subject to ever-evolving technology, a
SANTIAGO 00000252 002 OF 002
recent SQM presentation estimated the site at approximately 18
million tons of lithium-carbonate equivalent.
9. (U) SQM, which gets about 11 percent of its revenue from lithium,
recently reported profits of $501.41 million in 2008, up from $180
million in 2007. SQM's Chief Executive Officer indicated to the
press that lithium demand would grow in 2009 and profits are
expected to increase. The company is also counting on lower costs
in 2009 in key areas including energy, raw materials and exchange
rates.
10. (U) SQM expanded its capacity to extract lithium carbonate from
30,000 to 40,000 tons/year in the third quarter of 2008 and is
projecting capital expenditures of $300 million this year, some of
which will go toward expanding lithium capacity. The company
announced in January that it successfully placed two series of bonds
in the Chilean market for approximately US$173 million. The
financial resources will be used by SQM to refinance short- and
long-term debt and to fund its capital expenditures program.
Chile's Lithium Faces Competition From China
--------------
11. (U) Chile's lithium producers face competition from China, which
supplies about 23 percent of the world's lithium carbonate. China's
costs have historically been higher because it extracts lithium from
spodumene minerals. Recently, however, China started producing
lithium from brine, which is a cheaper method of extraction.
COMMENT: Chile's Position Secure in the Short-Term
-------------- --------------
13. (SBU) SQM anticipates being able to ride out the current
economic crisis based, in part, on increasing consumer demand for
lithium. Possible development of Bolivia's extensive reserves
(reftel),uncertainties about the technology for electric car
batteries, increasing competition from China and a potentially
evolving lithium recycling market, however, could change the
long-term picture for lithium demand. In the short-term, however,
it appears that Chile's position as the world's leading producer of
lithium is secure, and companies operating in Chile appear quite
capable of stepping up to meet the challenges of increasing global
demand for lithium from the country's substantial reserves. End
comment.
SIMONS
STATE FOR WHA/BSC, WHA/EPSC AND OES/ENV
SENSITIVE
SIPDIS
E.O. 12958: N/A
TAGS: ECON ENVR EAID EAGR ECON ETRD TBIO CI
SUBJECT: CHILE'S LITHIUM: WORLD'S LEADING PRODUCER EXPANDING
CAPACITY TO MEET GLOBAL DEMAND
REF: LA PAZ 267
1. (SBU) SUMMARY: Chile is the leading lithium chemical producer in
the world. Two companies, Sociedad Qumica y Minera de Chile S.A.
(SQM) -- the world's biggest producer of iodine and lithium -- and
Chemetall of Germany, dominate the production of lithium carbonate,
largely by exploiting brine sources in Chile. In 2008, SQM produced
95,400 MT of lithium, which is 30 percent of the world market share,
and Chemetall supplied about 28 percent. SQM, which expanded its
lithium carbonate capacity in 2008 from 30,000 to 40,000 tons/year
in 2008, plans to expand production capacity further in 2009-2010 to
meet growing lithium demand. End summary.
Chile Replaces U.S. as Leading Producer of Lithium
-------------- --------------
2. (U) For almost 50 years, the United States dominated the world
lithium market, and North Carolina used to be the largest U.S.
producer. In the mid-1990s, Chile became the leading producer of
lithium -- the lightest metal with physical properties that make it
well-suited to store energy. Lithium has become a key part of
rechargeable batteries, particularly those used in consumer
electronics.
3. (U) Chile began producing lithium carbonates in 1984. After the
discovery that Chilean brines were a lower-cost source and Chilean
operations cut prices to gain market share, North Carolina's lithium
mining operations closed in 1998. Today the only active lithium
plant in the U.S. is a brine operation in Nevada, which produces an
unknown proprietary amount of the metal.
4. (U) Despite being an abundant metal, economically viable lithium
deposits are not plentiful. Along with Bolivia, which faces
significant infrastructure and political challenges to developing
its lithium resources, Chile has the most extensive lithium reserves
in the world. According to the U.S. Geological Service (USGS),
Bolivia has an estimated 5.4 million tons of lithium, Chile has 3
million tons, China has 1.1 million tons, and the U.S. has about
410,000 tons. USGS estimates that Chile's Salar de Atacama contains
approximately 27 percent of the world's reserve base of the metal.
5. (U) Chile is particularly well positioned to take advantage of
recent demand increases for lithium. The battery industry doubled
its consumption of lithium carbonate between 2003 and 2007, and some
analysts are predicting double-digit annual sales growth for lithium
carbonate for at least the next three years. In addition, lithium
ion (Li-ion) batteries are gaining in popularity for defense,
automotive, and aerospace applications due to their high energy
density. Li-ion batteries may be adopted by the global automobile
industry as it transitions to more electric vehicles.
Two Companies Dominate Lithium Market
--------------
6. (U) Two companies, Sociedad Qumica y Minera de Chile S.A. (SQM)
-- the world's biggest producer of iodine and lithium -- and
Chemetall of Germany, through its Chilean branch called La Sociedad
Chilena de Lithio, dominate the production of lithium carbonate by
exploiting brine sources in Chile. In 2007, Chile exported 41,125
tons of lithium carbonate, as well as small amounts of lithium
hydroxide and lithium chloride. Reflecting a production increase in
2008, SQM alone produced 95,400 MT of lithium in 2008 -- 30 percent
of the world market share and all of it from Chile. A close second,
Chemetall, which mines lithium from both the U.S. and Chile, had
about 28 percent of the world market last year.
Lithium is a Material of "Nuclear Interest"
--------------
7. (U) Lithium is regarded as an issue of national security.
Despite huge investments in their mining operations in northern
Chile, neither company owns Chile's lithium reserves. This is
because lithium is regarded as a "material of nuclear interest" and
is regulated by Chile's Nuclear Energy Commission (CChEN),which
owns/controls the reserves. Under Chilean law, lithium concessions
are handled outside the general system for granting mining
concessions, and are subject to a special administrative concession
system.
SQM Increasing Lithium Production Capacity
--------------
8. (U) SQM started operations in Chile in 1996 and, as of December
2008, held rights to exploit the mineral resources of 197,000
hectacres in Salar de Atacama. Although the total reserves of Salar
de Atacama are unknown and subject to ever-evolving technology, a
SANTIAGO 00000252 002 OF 002
recent SQM presentation estimated the site at approximately 18
million tons of lithium-carbonate equivalent.
9. (U) SQM, which gets about 11 percent of its revenue from lithium,
recently reported profits of $501.41 million in 2008, up from $180
million in 2007. SQM's Chief Executive Officer indicated to the
press that lithium demand would grow in 2009 and profits are
expected to increase. The company is also counting on lower costs
in 2009 in key areas including energy, raw materials and exchange
rates.
10. (U) SQM expanded its capacity to extract lithium carbonate from
30,000 to 40,000 tons/year in the third quarter of 2008 and is
projecting capital expenditures of $300 million this year, some of
which will go toward expanding lithium capacity. The company
announced in January that it successfully placed two series of bonds
in the Chilean market for approximately US$173 million. The
financial resources will be used by SQM to refinance short- and
long-term debt and to fund its capital expenditures program.
Chile's Lithium Faces Competition From China
--------------
11. (U) Chile's lithium producers face competition from China, which
supplies about 23 percent of the world's lithium carbonate. China's
costs have historically been higher because it extracts lithium from
spodumene minerals. Recently, however, China started producing
lithium from brine, which is a cheaper method of extraction.
COMMENT: Chile's Position Secure in the Short-Term
-------------- --------------
13. (SBU) SQM anticipates being able to ride out the current
economic crisis based, in part, on increasing consumer demand for
lithium. Possible development of Bolivia's extensive reserves
(reftel),uncertainties about the technology for electric car
batteries, increasing competition from China and a potentially
evolving lithium recycling market, however, could change the
long-term picture for lithium demand. In the short-term, however,
it appears that Chile's position as the world's leading producer of
lithium is secure, and companies operating in Chile appear quite
capable of stepping up to meet the challenges of increasing global
demand for lithium from the country's substantial reserves. End
comment.
SIMONS