The global battle for control of lithium has been likened to the “Great Game,” the term coined to describe the struggle between Russia and Britain for influence and territory in Central Asia in the nineteenth century. On December 12, Germany signed a deal with Bolivia for its vast lithium reserves, deepening economic ties between the European engine and the South American country. It provides Germany with entry into the new “Great Game”, in which big powers like China are jostling across the globe for access to the prized electric battery metal.
The deal comes after two years of intense lobbying by Germany as it sought to persuade Bolivian President Evo Morales’ government that a small German family-run company was a better bet than its Chinese rivals. German officials say they won out over China because they championed the bid by ACI Systems GmbH for the opportunity to lower Germany’s reliance on Asian battery makers and help its carmakers catch up with Chinese and American rivals in the race to make electric cars.
China has been quietly cornering the global lithium market, making deals in Asia, Chile, and Argentina as it seeks to lock in access to a strategic resource that could power the next energy revolution. China invested USD $4.2 billion in South America in the past two years, surpassing the value of similar deals by Japanese and South Korean companies in the same period. Chinese entities now control nearly half of global lithium production and 60 percent of electric battery production capacity.
Lithium, the so-called “white petroleum”, drives much of the modern world. It forms a small but essentially irreplaceable component of rechargeable batteries, used in consumer devices like mobile phones and electric cars. It also has pharmaceutical and other applications.
Over half of the earth’s identified resources of the mineral are found in South America’s “lithium triangle”, an otherworldly landscape of high-altitude lakes and bright white salt flats that straddles Chile, Argentina, and Bolivia.
Until recently, investors had kept their distance as Argentina and Bolivia lacked predictability and a friendly business environment, and Chile kept strict control over lithium output.
ACI’s win means Germany now has a foothold in the final frontier of South America’s Lithium Triangle: the Uyuni salt flat in Bolivia, one of the world’s largest untapped deposits. The triangle comprises lithium deposits in an area that includes parts of Chile, Argentina, and Bolivia.
German diplomats in the Bolivian capital had stressed high-level German government backing for the project, potential loan guarantees, and the tantalizing prospect of supply agreements with German automakers. “This partnership secures lithium supplies for us and breaks the Chinese monopoly,” said Wolfgang Tiefensee, the German Economy Minister of Thuringia, a state that is an automotive manufacturing hub.
The German push included a series of visits by German government officials who talked up the benefits of choosing a German company. Bolivia’s Deputy Minister of High Energy Technologies, Luis Alberto Echazu, confirmed Bolivian officials also toured German battery factories. German Economy Minister Peter Altmaier wrote a letter to President Morales, an environmental champion, emphasizing Germany’s commitment to environment protection.
The Bolivian Project
The Bolivian project includes plans to build a lithium hydroxide plant and a factory for producing electric car batteries in Bolivia. Once completed, the factory will help to fulfill President Morales’ ambition to break with Bolivia’s historic role as a mere exporter of raw materials.
ACI has said it expects the lithium hydroxide plant to have an annual production capacity of 35,000-40,000 tonnes by the end of 2022, similar in output to plants operated by the world’s top lithium producers. 80 percent of that would be exported to Germany.
ACI’s willingness to build a battery plant in Bolivia helped to seal the deal, said Deputy Minister Echazu. The Chinese did not want to build a battery plant in Bolivia because they felt it made no economic sense to ship in materials to make the batteries only to re-import the final product to China, he said. China’s embassy in La Paz declined to comment on the Uyuni project, but said the potential for future cooperation with Bolivia on lithium was “huge.”
Bolivia’s state-owned lithium producer YLB will own 51 percent of the new joint venture. Control of the project was another key demand of the Bolivians, who have bitter memories of foreign powers meddling in the former Spanish colony to seize its natural resources.
Juan Carlos Montenegro, the head of YLB, said geopolitics was a factor for Bolivia in deciding which companies to work with. “We don’t want a single country to set the rules, we want balance and other world powers must help create that balance,” he said. “So for Bolivia it’s important to have not just economic partners for markets, but geopolitical strategic partners.” He stressed, however, that Bolivia had not been predisposed against China in deciding who had made the best offer. “China-Bolivia relations are still good. China is present in every country in the world and impossible to avoid,” he said.
Potential Risks for ACI
ACI is a family-run clean tech and machinery supplier that has no experience producing lithium. The company dismissed concerns from some lithium analysts about its ability to deliver, saying its small size gives it more flexibility to bring partners from different fields into the project. Mr. Schmutz said the company has preliminary lithium supply deals with major German carmakers, but declined to provide details, citing non-disclosure agreements.
While Uyuni boasts at least 21 million tonnes of lithium, President Morales has made nationalizing natural resources a key policy plank. CEO Wolfgang Schmutz said in an interview that Bolivian officials assured ACI foreign investments in the Uyuni would be guaranteed should anything go awry.
In addition, unlike Chile’s sun-drenched Atacama salt flats, snow and rain slow the evaporation process needed to extract lithium from brine in Uyuni, and the landlocked nation will have to use a port in neighboring Chile or Peru to ship the metal out.