Japan and Chile Explore Opportunities to Boost Local Lithium Industry

Chile, a global powerhouse in the lithium mining sector and home to the world's largest lithium reserves, is actively courting Japanese battery and metals companies, along with other Asian investors. The Chilean government is looking to offer these investors long-term preferential access to lithium reserves in exchange for their commitment to add value to the raw material and transfer valuable skills. Chile, known for its rich mining resources, is seeking partnerships with companies that can contribute to the development of processing and manufacturing capabilities within the country's borders.

In an effort to attract foreign investments and facilitate economic growth in the lithium sector, Chile has begun granting select companies’ preferential access to lithium resources. In a notable move earlier this year, the Chilean government provided Chinese electric vehicle (EV) manufacturer BYD Co. with access to preferential prices for lithium carbonate sourced from SQM, the world's second-largest lithium producer. This lithium supply will be used in a cathode factory BYD plans to build in northern Chile. This strategic partnership represents Chile's approach to enhancing the value chain of its lithium production.

Chile's plan for additional lithium offtake agreements is set to expand further next year when Albemarle Corp.'s lithium mine in Chile becomes available for similar arrangements. While SQM's production contract is set to expire in 2030, Albemarle's contract is valid through 2043. This extended timeline provides potential investors with greater certainty regarding preferential pricing, making the process more competitive, as outlined by Chilean Economy Minister Nicolas Grau.

Grau explained, "Battery producers want to be part of lithium extraction, and the only reason is to get certainty of supply." He emphasized the simplicity of this approach, as it eliminates the need for battery producers to wait several years to secure a steady supply of lithium. The goal is to create a seamless partnership between lithium producers and battery manufacturers.

During a recent visit to Tokyo, where he is leading a roadshow that will also include stops in South Korea and China with President Gabriel Boric, Grau met with Japanese companies Sumitomo Corp., Mitsui & Co., and Sojitz Corp., all of which are deeply involved in the battery and electric vehicle supply chain. Grau reported that Japanese companies expressed significant interest in investing in Chile's lithium sector.

Japan has been actively investing in the development of next-generation batteries, driven by competition with global industry leaders like Tesla Inc. and BYD in the transition toward zero-emission electric vehicles. Companies like Panasonic Holdings Corp. are making strides in establishing a lithium-ion battery supply chain for EVs produced in North America, with recent agreements and pacts signed by Japanese and Canadian officials.

Chile is adopting an agnostic approach to attract investments from countries both aligned with China and those partnering with the United States, which is eager to diversify its clean-energy supply chain. Chile benefits from a free-trade agreement with the United States, making its approach appealing to a range of international investors.

As the largest copper-producing nation and the second-largest lithium supplier in the world, Chile aims to harness the surging demand for battery materials. Earlier this year, the Boric government unveiled plans for the state to acquire a controlling stake in lithium operations considered strategically significant. The dual objectives of these initiatives are to increase lithium production and improve the sustainability of extraction processes. Chile sees its abundant lithium resources as a crucial asset in the transition to cleaner energy and sustainable development.