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How a lithium-rich Chile has failed, make a plan to pull out of the battery-makers

SANTIAGO (Reuters) – In March 2018, the Chilean government revealed the big news: Corporate investors, including South Korean electronics giant, Samsung, would be the construction of three plants in Chile to the production of battery components for electric vehicles.

FILE PHOTO: An aerial view shows the salt-water swimming pools: WE use lithium mine on the atacama salt flat in the Atacama desert of northern Chile, January 10, 2013. REUTERS/Ivan Alvarado/File Photo

Chile had been attracted by the companies that offer. In return for helping the South American country is the world’s No. 2 is a miner of lithium, jumpstart has its own EV battery manufacturing, the companies would have a guaranteed supply of the desired metal, at competitive prices, for nearly three decades, in the midst of a global race to lock up supplies.

Now the arrangement is falling apart. The chilean government has failed to deliver its abundant, bargain-priced, the lithium had been in a rapidly changing market, according to a Reuters review of regulatory filings, and internal documents of the state development agency.

Chilean chemical company, Molymet, which is going to be one of the of the battery components to the factories, announced last week, has been recovered from this effort; they have refused to say why. Following a similar defection by South korea’s POSCO. The producer, in June said it was pulling into a joint venture for the construction of its Chilean plant, with the Samsung rechargeable battery unit, with an indication of the concerns about lithium supplies. Samsung told Reuters this is now the review of the project.

Sichuan Fulin Transportation Group Co. in the meantime, it is still possible to get the scheduled Chilean plant out of the ground. Fulin did not respond to requests for comment.

The offers hinged on the world’s largest producer of lithium – Albemarle Corp – for the promotion of the outcomes of the Chilean operations for the delivery of the planned facilities. But the Albemarle’s expansion will be limited due to technological and legal constraints. The U.S.-based coal miner, has feuded with Chile’s government, on the cost of the battery makers would have to pay for lithium. And it is not the production of the lithium hydroxide in Chile, and the nature of the processed lithium is required by the POSCO-Samsung.

While Chile has the largest reserve of the “white gold”, but it has not capitalized fully on the rich. Like Albemarle, the nation’s other major lithium miner SQM, it becomes difficult for the production to be in the middle of a strong world-wide demand, which is expected to triple by the year 2025. The government, meanwhile, has a slow is to get new players to enter the market.

Chile is the latest stumbling block in efforts to woo battery-makers, it appears that the displacement, that is, the industry is in Asia, it will not be an easy one, ” says Emily Hersh, a managing partner of the Washington, D. C.-based consultancy, DCDB group.

“It’s a big reality check,” Hersh said. “Chile has been a major force in the manufacture of chemicals and chemical substances contained in the batteries. If they fail to do so, everyone needs to pay attention and find out why.”

A RARE DEAL

President Michelle Bachelet at the end of 2016, it struck an unusual deal with Albemarle, which is the source of nearly half of Chile’s lithium production.

Her centre-left government, gave Albemarle the go-ahead to more than double its output by 2043. In return, Bachelet’s mandate, the US-based miner is to guarantee that a quarter of the annual production on the prices of battery makers are prepared to retail store in the country.

The chilean development agency, Corfo launched an offer to potential investors in April 2017, with the hope of the new ones breaking ground, through the early 2020’s. It received 12 offers.

But the behind-the-scenes of Chile is concerned about the possibility of delivering the promised one of lithium, according to government documents reviewed by Reuters describe the process of decision-making.

State projections showed the Albemarle’s production of 64,000 tons of lithium in 2020 and by up to 16,000 tonnes for the new ones, in accordance with the contract documents.

The three winning projects will be combined to 28,496 tons of lithium, according to the documents, nearly two times the amount of Albemarle, which was required for the power supply.

“It would be just as possible, in order to comply with the requirements of Fulin and Molymet, on the one hand, or Posco-Samsung, on the other,” he said, an internal Corfo memo dated March 9, 2018.

The documents to be presented to the agency, is pinned his hopes on the Albemarle and speeding its expansion. The company in March 2018 shall be used to increase the export quota to as much as 145,000 tons of lithium per year.

But in Chile, the regulators, in September, rejected the plan, saying that the miner had failed to prove it had the technology needed to create the tools with lithium without any effort on the part of the water resources.

Albemarle says that it was on track to boost its production capacity to 80,000 tonnes of lithium, by 2021, is still short of what the government needs to make good on its promises to offer players.

The state has a lot to be desired for the reality,” said Jaime Alee, a Santiago-based lithium consultants.

Corfo also declined repeated requests for comment.

Albemarle, and the authorities bickered over the price at which the company was required to sell its lithium.

Corfo, under the leadership of the centre-right President, Sebastian Pinera, threatened, in Albemarle to the arbitration, and in October of 2018. In January, the parties struck a deal, but it has not yet released the details of their agreement from each other.

An Albemarle spokesperson told Reuters that Corfo had been at the battery, from the makers of the way in which the price was to be calculated.

Eduardo Bitran, former head of Corfo, has said that the terms were clear.

THE LAST STRAW

The dealbreaker, for POSCO it was a better product mix.

Albemarle is only producing lithium carbonate in Chile, and is often used in consumer electronics products. For the proposed POSCO-Samsung’s plant 14,231 tons of lithium hydroxide, to an increasing extent, the preference for the creation of an EV-battery cathodes.

The talks between POSCO and the Albemarle for the production of the material, and it collapsed in June, POSCO, said it is moving forward, the company, in order to get the output.

In the midst of the chaos, the Chilean government officials, recently took to the road in Europe, Japan, and South Korea, in order to change the pitch of one of the other auction for the battery maker, it is planned to start by 2020 and is offering a discount lithium SQM is for companies that wish to build plants in Brazil.

InvestChile, the nation’s investment promotion agency, has told Reuters that the rules are clear at this time.

“It is important to guard against the situations that have happened in the past,” the agency said.

Reporting by Dave Sherwood; Additional reporting by Natalia Ramos from Santiago, and David Stanway in Shanghai; Editing by Marla Dickerson

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