Lithium: the star of the future for the Chilean economy

The world’s lightest element is a basic building block of our hyper-communication society, found in computer batteries, cellphones and MP3 players, as well as the new hybrid cars. It is, without doubt, a rising star of globalization – and Chile is its biggest exporter worldwide.

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At the Santiago Motor Show in October 2010, seven major car brands put hybrid models on show to the public: Hyundai, Peugeot, Chery, Kia, Nissan, Mitsubishi and Honda. All were eager to display their take on the ‘car of the future’, which uses its mix of electric power and traditional engine to reduce environmentally unfriendly greenhouse gas emissions.

The fact that these cars exist on a commercial scale the market today is thanks to recent developments in the metallic element lithium.

Experts from the academic and commercial communities alike agree that lithium is becoming increasingly important on the global stage. The well-known US inventor and scientist Stanford Ovshinsky said, during a visit to Chile in October 2009, that countries with lithium reserves are “feeling very confident that it will see substantial growth.”

Chile is one of those countries. The U.S. Geological Survey states that it has 3 million metric tons of lithium in the northern Salar de Atacama salt flats, the world’s second-largest lithium reserves after Bolivia, with 5.4 million metric tons. And, with extraction processes still in exploratory phases in Bolivia, Chile is currently dominating a full 80 percent of the global export market.

Why lithium?

Lithium has taken a globalizing and increasingly environmentally-aware world by storm. One key factor in its success has been the development of hybrid technology by the automobile industry, which uses electric batteries to help power cars more efficiently and reduce carbon emissions.

For many years, battery-powered systems in cars had failed on a commercial scale because the battery had to be charged by an external source. Lithium solved the problem: batteries made from the mineral showed a greater durability and efficiency, and had the potential to be charged by the movement of the vehicle’s brakes.

The models presented at the Santiago Motor Show in October, and sales figures from leading manufacturers, show that lithium is here to stay in the motor industry. Toyota, for example, sold 100,000 hybrid vehicles worldwide in 2009, and estimates that 100 percent of its production will be hybrid within the next 10 years.

Another driving force in the success of lithium has been the phenomenon of globalization. It is an indispensable part of the batteries used in cell phones, iPod, Blackberrys, digital camera, computers, MP3s and laptops. With more than 1.2 billion cell phones in existence today, and a similar number of computers, lithium is a crucial component of today’s communication-rich world.

Chile’s copper of the future?

Experts believe that extraction and exportation of lithium will play an important part in the future of the Chilean economy – especially its mining industry – just as copper has done before it.

Since 1998, Chile’s exports of lithium have increased 460 percent and demand has grown between 7 and 8 percent every year in the last decade. The price of the mineral has shot up from US$1,760 per metric ton in 1998 to US$6,000 per metric ton in 2008, while figures from Chile’s Central Bank show that lithium exports in the period increased from US$39.3 million to US$220.2 million.

According to Luis Sougarret, President of the Institute of Chilean Mining Engineers, in the annual report from the Mining Directory of Chile (Direcmin), “the future of lithium means mining will continue to play an important part in Chile’s progress towards social and economic development.”

Lithium from the Salar de Atacama can be extracted at a very low cost, because, unlike elsewhere in the world, it does not need to be treated or purified. This allows the two Chilean companies which have license to exploit Chile’s reserves, SQM and the Chilean Lithium Society,  to obtain the mineral very efficiently. Lithium mining abroad faces much higher costs – between US$3,000 and US$5,000 annual investment – and this means that Chile has little international competition in the lithium market.

For now, of course, lithium is less valuable to the Chilean economy than its leading export, copper. Copper accounts for 90 percent of Chile’s total mineral exports, while lithium accounts for just 1 percent. However, with 90 percent of the world’s reserves in the Chilean and Bolivian salt flats, the future is bright for the Chilean lithium industry. “Lithium has great potential to become a star,” says Luis Sougarret. “And it means that Chile’s mining future is growing.”

Scientist-inventor Stanford Ovshinsky agreed: “Chile has a natural resource that is more valuable than oil, and that is lithium. Its use will have an impact on the daily lives of everyone.”