EconomyFinancialWhy are AMLO and Morena now so interested in...

Why are AMLO and Morena now so interested in lithium?

Lithium once again stars on the political scene in Mexico. President Andrés Manuel López Obrador said in his morning conference that if the electricity reform that he promotes in Congress is not approved, and that among other things he seeks to stop the granting of concessions to private parties to exploit the lithium deposits in the country, he will send the next day an initiative to reform the Mining Law and protect lithium.

This is not the first sign of interest by the Mexican government in this mineral. A day before the president’s declarations, Mario Delgado , leader of Morena, posted on his Twitter account a photo of himself dressed in a black T-shirt with a print of the symbol for lithium, Li, on the periodic table. The sudden interest in the so-called white gold is no coincidence, all countries are trying to secure reserves of what they foresee will be the substitute for oil.

By 2030, global demand for lithium is expected to exceed two million metric tons of lithium carbonate equivalent, more than double the projected demand for 2025, according to data from analytics firm Statista. Increases in demand for batteries for electric vehicles will be a strong driver of lithium consumption in the next decade.

Earlier this year, US automaker General Motors announced that it aims to eliminate emissions from its new light-duty vehicles by 2035. Ford, Volkswagen, Nissan and Toyota have detailed strategies to electrify much of their fleets over the next decade, while that other brands, such as Mini, Jaguar Land Rover, Volvo and Audi , have announced that they will stop selling gasoline or diesel models in the next decade. Suddenly, the delay by major automakers to electrify their fleets is turning into a race to see who will get there before everyone else.

Global sales of electric vehicles amounted to 4.2 million units in 2021, 108% more than in 2020, according to data from the consulting firm Jato Dinamycs. In many countries, government initiatives will accelerate the shift to zero-emission mobility, but even without new regulations or bans, half of global passenger vehicle sales in 2035 are expected to be electric.

The amounts of lithium – and other elements – that each new vehicle requires vary depending on the type of battery and the model, but it could be around eight kilos of lithium, plus another 20 kilos of manganese, 14 kilos of cobalt and 35 kilos of carbon. nickel, according to figures from the Argonne National Laboratory. The Tesla Model S vehicle, for example, is powered by batteries that require around 12 kilos of lithium, and demand around the world continues to rise as battery-powered options become more popular.

“In the coming decades, hundreds of millions of vehicles will hit the road with huge batteries inside, and each of those batteries will contain tens of kilograms of materials that have not yet been extracted,” says a report from the International Energy Agency. (IEA). This massive conversion of individual mobility, which from the next decade will go from depending on fossil fuels to requiring critical minerals such as copper, lithium, nickel, cobalt and rare earth elements, is changing the order of priorities of governments around the world.

Lithium, electric vehicles and the T-MEC

Today, world production of lithium is concentrated in Australia, South America and Asia, but with the entry into force of the trade agreement between Mexico and the United States and Canada ( T-MEC ), the exploitation of lithium becomes more relevant since it must be ensured a supply chain in North America. In 2025, cars manufactured in these three countries must have at least 75% of their components produced in the region so that they can be marketed free of tariffs. This includes lithium batteries, which means that vehicle manufacturers will have to develop a supply chain in North America to be able to produce them.

The White House reported in late March that President Joe Biden will invoke the Defense Production Act to encourage domestic production of minerals needed to make batteries for electric vehicles. Biden’s order could help companies receive government funding for feasibility studies on projects that extract materials including lithium, nickel, cobalt, graphite and manganese.

Mexico has already attracted investment for the exploitation of lithium deposits. There are currently 36 lithium mining projects, all of them financed with foreign capital and controlled by 10 companies, according to data from the Comprehensive System on Mining Economy and the Ministry of Economy. Most are small Canadian companies seeking to generate interest in the market and attract resources from investors. But there are really only three firms that are active in this sector and one that has advanced in its project: Bacanora Lithium , owned by the Chinese Ganfeng Lithium.

Bacanora and the mining concessions

To date, Bacanora Lithium owns three concessions in Sonora and has invested $50 million in feasibility studies and pilot production. In 2018, the company forecast a production of 17,500 tons of lithium carbonate for 2020. The target, however, suffered delays and the company’s current estimate is that production will start in 2023 and increase to 35,000 tons per year. The company plans to invest up to 2,000 million dollars more in the next 10 years.

China’s Ganfeng Lithium, which in 2021 took over the entire share capital of the British company Bacanora Lithium, covers a wide expanse of the lithium-ion battery supply chain, including lithium resource development, refining and processing. (75% of its total income), battery manufacturing (17%) and battery recycling and others (8%), according to company data taken up by the analysis firm Global X ETFs.

If the electricity reform is approved, which seeks to reform articles 25, 27 and 28 of the Constitution, private investors will no longer be able to request concessions for the exploitation of lithium deposits in Mexico. However, López Obrador has said in the past that Bacanora will not be expropriated.

Today, the president reiterated his interest that lithium remains in the hands of the nation: “In case an absolute majority is not reached, the next day I send the law to reform the Mining Law and protect lithium.”

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