Japan, Chile boost ties in lithium extraction, supply

Japan and Chile have agreed to strengthen cooperation on lithium mining and supply, including deals for Japanese firms’ acquisition of long-term preferential access to the battery metal, in exchange for adding value to the raw material extracted in Chile and transferring skills. 

Japanese Trade Minister Saito Ken and Chile Mining Minister Aurora Williams said the two countries will focus on ensuring stable supply of the battery metal and the use of mining methods that protect the environment.

“Balancing economic growth and decarbonization is a common challenge for the two countries, and Chile has key minerals to help us achieve this,” Saito said at the signing ceremony, Chilean news site Emol reported.

Under the improved agreement, Japan and Chile will cooperate on developing lithium supply in environmentally friendly ways and hold an annual public-private joint conference on the mining sector to improve collaboration. This event will bring together Japanese companies operating in Chile and Chilean government officials.

Since launching its national lithium strategy last year, which gives a majority stake in any projector to state-owned companies, Chile has been working on attracting companies that can help it develop processing and manufacturing capabilities. 

In April last year, Chile granted Chinese EV maker BYD access to preferential prices for lithium carbonate produced by SQM (NYSE: SQM), the world’s second-largest lithium producer. The output will be used in a cathode factory in the country’s north, which was set to open by the end of 2025. The plan is currently in standby due to “uncertainty,” the Chinese carmaker said, without elaborating.

Japan’s Sumitomo Corp., Mitsui & Co. and Sojitz Corp., are some of the companies involved in the battery and EV supply chain that have already tapped into the Chilean lithium market in the past year.

South Korea on board

The South American nation has also sought to boost cooperation with other Asian players, including South Korea. Seoul is said to have bought some lithium carbonate this year from Chile via state-controlled Korea Mine Rehabilitation and Mineral Resources Corp. (KOMIR).

Korean companies processing lithium in Chile may be eligible for incentives from the U.S. to diversify their clean energy supply chains. The nation, which has a free trade agreement with the U.S., has been in discussions with the Biden administration to determine if value-added products would meet the requirements for these incentives, and early indications suggest they would.

Albemarle and SQM, the only lithium producers in Chile, have agreements mandating that a portion of their production is to be allocated at preferential prices to companies that keep investment in the country. This stipulation aims to incentivize sustained economic contribution and development in the lithium sector in Chile, the world’s second largest producer of the battery metal.