Lithium: record exports and battery-production fine print

Lithium exports saw 133% interannual growth while different sectors debate its industrialization

Lithium is no longer a promise of the future and the government is starting to record actual data: exports hit record numbers in the first quarter of 2023 with a 133% year-on-year increase. Given this context, the Casa Rosada and governors from northern provinces aim to move forward on two bills that create incentives to advance lithium industrialization and electromobility (regulating the production of electric vehicles). 

However, the draft bill is currently being reviewed by the Economy Ministry because some of the articles, such as the internal market quotas, export duties, royalties, and “preferential prices”, are deemed questionable. 

Lithium exports have broken a new record: they added up to US$91 million in March, so the first quarter had an overall foreign sales total of US$233 million (a 133% increase). This is partly explained by higher prices but also because the exported amounts grew by 23%. Hence, lithium dollars already account for a third of the country’s mining activity (27%), according to data from the Secretariat of Mining.  

The secretariat, led by Fernanda Ávila, reported that these increased figures were reached due to two active projects currently: Fénix, in Catamarca, and Olaroz, in Jujuy. 

“If Argentina keeps moving at this pace, and the other six unfinished projects begin production, in 2025 we will expand production capacity to more than 200,000 tonnes,” said an official report. 

This would bring the exports up to more than US$7 billion, considering the average prices of 2022, where the carbonate tonne cost US$37,000. This value may increase as the demand for electric mobility rises. 

Industrializing lithium

The Lithium Board, formed by governors, the Executive Branch, and the Economy Ministry, has agreed on a legal framework to promote industrialization. The draft was written by Casa Rosada and sent to the Economy Ministry. However, progress has stalled due to some “articles under observation”. 

Sources in the Executive Branch believe that if the corrections take too long, this will delay the project’s submission to Congress and its approval will become pretty much impossible, being an election year. Also, they think that if there is a change in government after the presidential elections, the chances of a bill like this making it to Congress are zero. 

Santiago Dondo, former undersecretary of Mining Policies during the former Cambiemos administration, recently wrote a magazine article called ‘Let’s not create battery factories’ in a Seoul publication — a move criticized by the government. 

The bill to develop the value chain of lithium and batteries, as it reads on the draft, hopes that Argentina can start by joining the industrialization of a few elements, such as cathodes and battery cells, and only then start producing batteries in the mid-term. 

“Without a regulatory framework, companies will not have incentives to invest in this area, when 85% of the market is in China,” sources in Casa Rosada explained.  

Articles under “observation”

There are a few articles under “observation” by the Secretariat of Mining, which operates under Economy Minister Sergio Massa. One such article declares lithium to be of  “strategic interest”. “There are doubts in the ministry as to whether the inclusion of this article would imply that lithium would be removed from the mining code, which may “discourage investments” It will probably be dropped. 

Today, there are only two active lithium mines, but there are 38 projects in the works in stages that range from assessment to construction. Massa is promoting lithium on every trip to the US and he needs investments, especially in a context where dollars are scarce. One of the two projects in Argentina is owned by the US company Livent. 

The bill also sets “industrialization quotas” —that is, creating a mandatory quota for the domestic market that includes a “sales obligation” of part of the mining companies’ production, based on “preferential prices” that would be lower than the export ones. There are concerns about the percentages in the draft, which range from 5% to 20% of total production. The mining companies involved are against it. 

Another point under review is the export duties, which appear segmented in the draft: they may increase for lithium exports, but could be set at  0% for exporting ion-lithium battery cells and packs. Yet another element under discussion is the “variable royalties” that would depend on the international price of lithium. 

Electromobility bill

Sources at Casa Rosada defend the project and assure detractors that it is not similar to Chilean law, which also has domestic market quotas and, even though it doesn’t include export duties, royalties can reach up to 40%. This explains why last year Chile collected US$5 billion as a result of historically high international prices. 

What has raised expectations for consensus within the government is the electromobility bill project, which the executive has almost finished drafting and will then send to the Industry Secretariat for review. The Economy Ministry views this bill more favorably, which will establish a set of promotion measures and will likely make it to Congress this year. In this case, sources within the Executive Power believe it will get a greater boost because it has the approval of a good portion of the private sector, such as businessman Daniel Herrero, former president of Toyota. 

Originally published in / Translated by Agustín Mango

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