"Lithium triangle" seeks OPEC-style cartel as Lithium demand increases

By Al Mayadeen English
Source: Quartz
7 Nov 2022 16:07
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Lithium-rich countries such as Argentina, Chile, Bolivia as well as Indonesia, seek to establish an Opec-like organization according to a Quartz report.

"Lithium Triangle" of South America (Latin America Post)

Demand for lithium is increasing globally, a Quartz report noted, adding that the cost of lithium is skyrocketing.

The report argues that the potential to exert more control over the world's supply of this mineral and other battery metals like nickel and cobalt will be a profitable opportunity for nations with abundant supplies of these materials.

S&P Global noted, as cited by the report, that “the battery will be the defining technological and supply chain battleground for the industry in the next decade, and access to their constituent raw materials will be crucial.”

Establishing a cartel like the 13-nation Organization of Petroleum Exporting Countries (OPEC), the report reads, whose choices to raise or decrease oil output have worldwide repercussions on crude prices, foreign policy, and the global economy, is one method for mineral-rich countries to gain more leverage through pricing power.

From Southeast Asia to South America, interests have grown among the battery mineral-producing nations to establish organizations like OPEC.

Indonesia calls for an OPEC-style Lithium organization

This week, Indonesia's Investment Minister, Bahlil Lahadalia, told the Financial Times that the nation was thinking about establishing OPEC-style structures to have more control over the supply and pricing of minerals and metals that are crucial for the worldwide switch from fossil fuels to clean energy.

According to Quartz, Lahadalia explained that “Indonesia is studying the possibility to form a similar governance structure [to OPEC] with regard to the minerals we have, including nickel, cobalt, and manganese.”

He continued by saying that Indonesia is preparing a proposal to promote the cartel initiative to other notable nickel producers.

The "Lithium triangle" is on board

The Quartz report stated that momentum is developing in South America for the creation of a "lithium OPEC".

The state news agency of Argentina, Telam, claimed last month that the foreign ministers of Chile, Bolivia, and Argentina are engaged in "advanced talks" to develop a system that would allow them to regulate lithium pricing "at a global level."

Alongside Indonesia, the three nations, together referred to as the "lithium triangle" since they account for 58% of the world's identified lithium resources, are attempting to entice more significant producers to join them.

The three aforementioned foreign ministers, according to Quartz, want Australia, the top producer of lithium in the world, to be a part of the proposed lithium cartel, according to Brazil's Rio Times.

China has sway when it comes to Lithium

Even though it only has 6% of the world's recognized lithium deposits, China is the world's top manufacturer of EVs and currently controls 58% of the world's lithium processing capacity, the Quartz report noted.

In order to convert the raw material into a usable form or to acquire the finished lithium carbonate or hydroxide for use in batteries, the lithium manufacturers would therefore continue to be dependent on China.

Despite the #West's desperate attempts to increase their battery production, #Asia still dominates the industry with 6 out of the top 10 companies being #Chinese. pic.twitter.com/U8uRYla9ww
— Al Mayadeen English (@MayadeenEnglish) October 9, 2022

China would continue to have some influence in any deal, the Quartz report read, since any cartel "would still be pretty dependent on China being its main customer."

In the long run, it's more difficult to predict China's sway since different regions will create their own battery-production hubs, thus shifting demand away from Beijing.