Government may allocate domestic market lithium quota

Flurry of lithium initiatives includes quotas, battery factories, electric vehicle law and tax changes

President Alberto Fernández included lithium in the government’s agenda during his speech at the opening of Congress’ regular sessions. The idea of “adding value” will include moving forward in the industrialization of the mineral through mandatory domestic market quotas of up to 20% of production, cell and battery factories by state company Y-TEC, a new electromobility law, and royalties that could vary depending on international prices and value addition.

“We work with the provincial governments and the private sector to add value, to create Argentine jobs,” Fernández said in his speech, adding that they are trying to get the mineral categorized as a “strategic resource”. 

Argentina, Bolivia and Chile between them  hold 60% of the world’s proven reserves.

The president is referring to work with provincial governments, after initiatives the Foreign Ministry had begun with Chile and Bolivia failed to bear fruit. At present, all ideas are discussed in the lithium working group, whose participants include the governors of Jujuy, Salta and Catamarca, the national government (via the Mining Secretariat, which responds to Sergio Massa’s Economy Ministry) and the Secretary of Strategic Affairs (which answers to the president’s offices, the Casa Rosada).

Value addition

The “value addition” agenda includes various measures. On the supply side is the proposal of guaranteeing materials for industrialization on the internal market. For that, there will be a quota, initially set at 5%, which could rise to 20% if demand increases over the years. This could come in the form of a law sent to congress.

On the other hand, to guarantee that there is indeed industry demand, two measures are under consideration. The state will seek to enter cell and battery production through the state company Y-TEC, whose president is Roberto Salvarezza, and which responds to state energy company YPF.

Between April and May, the plant will be inaugurated. It is located in Berisso, alongside La Plata University. Next month, therefore, the first cells produced in Argentina could be finished. Although this was initially scheduled for last December, there were delays in the supply of inputs, according to official sources. The facility’s cleanrooms are currently being finished, according to Salvarezza.

It is hoped that the plant will produce enough batteries for 2,000 homes, likely for solar panels to store power, or for 400 electric vehicles. Y-TEC is already working on a similar plant five times larger, which will be in Catamarca province. There, the plan is to produce cells for electric vehicles: bicycles, motorcycles, or buses.

At present, the demand for electromobility in Argentina is in its early stages. Consequently, the government will attempt to attract private companies to the value chain, especially car manufacturing terminals. The government therefore plans to send a new electromobility law to congress, which will replace the one that was written by the Ministry of Productive Development under Matías Kulfas. 

Although congress is currently blocked as the opposition boycotts sessions over the government’s attempts to impeach the supreme court, many deputies from opposition coalition Juntos por el Cambio, especially those from the UCR party, will abandon the “blockade”. In other words, they will maintain their stance on judicial bills, but they will be willing to debate other topics.

The reason behind the modifications to the electromobility law, official sources say, is that the previous iteration envisaged an end to cars with combustion engines in a few years, something which will not be possible because the energy transition is expected to proceed more slowly, and above all because Argentina depends on the conventional energy resources in the Vaca Muerta shale field.

“Enormous demand”

There may also be changes to how lithium is taxed, in addition to the Economy Ministry’s elimination of export rebates last month. Jujuy governor Gerardo Morales said that the province is working to increase royalties, which could become variable royalties, in order to capture a part of the lithium income in line with the evolution of prices, or as value is added. In the past two years, the price of lithium has increased by over 400%.

The question is what impact these changes could have on companies’ investment decisions, especially after provinces such as La Rioja stepped in and ended lithium concessions. At present, two projects are already producing and exporting, six in construction, and 20 at the exploration stage.

“Investment will not be affected, because there’s enormous demand for lithium,” Salvarezza said on Radio Led. “Electrification in the northern hemisphere and in China is a reality, if you have the resource the investment is guaranteed.”

Originally published in / Translation by Agustín Mango and Amy Booth


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