Chancellor Olaf Scholz is visiting Latin America to assist Germany obtain greater supplies of lithium, which carmakers like Mercedes-Benz Group AG and Volkswagen AG require for their electric-vehicle batteries.
Chile, the world’s second-largest source of lithium after Australia, is now using a considerable portion of its supply. According to those familiar with the proposals, Scholz, who met with Chilean President Gabriel Boric on Sunday in Santiago, wants a greater contribution for Europe’s largest economy. On Monday, the chancellor was scheduled to meet with Brazil’s Luiz Inacio Lula da Silva.
According to the persons who requested not to be identified because the negotiations are private, part of Germany’s approach to entice Chile is to have more of the manufacturing process headquartered locally and to help make extraction and processing less detrimental to the environment.
“Some states believe that all raw resources originate from China, but this is not the case. Many raw materials, for example, come from Argentina or Chile, are exported to China, processed there, and then sold again,” Scholz remarked on Sunday in Buenos Aires. “The issue is, can’t the processing of these commodities, which provides thousands of jobs, be moved to the nations where these resources are sourced?”
Major industrialized nations, such as Germany, are aggressively contending for increasingly limited resources, and access to metals and rare earths is critical for the shift to cleaner, more technologically sophisticated economies.
In the global struggle for numerous commodities, China has emerged as the major supplier or processor, prompting concerns about the Chinese government having undue influence.
These concerns are especially relevant in Germany, which has been more reliant on Russian fossil fuel imports in recent decades. Scholz’s government has been scrambling to diversify sources of the goods it needs to keep its economy going since Vladimir Putin’s invasion of Ukraine.
On Saturday in Buenos Aires, Germany and Argentina signed a memorandum of understanding to safeguard Berlin’s access to the country’s abundant lithium deposits. Scholz spoke out against a strategy that “primarily serves the interests of that country that wants to process the commodities for itself” after meeting with Argentine President Alberto Fernandez.
Scholz gave a similar message during his visit to Chile’s capital Santiago on Sunday. Germany is prepared to enter the lithium industry with Latin America in order to gain independence from China.
Chilean President Gabriel Boric stated that he is committed to reform his country’s lithium sector. “Through different treaty processes, we seek to create a national lithium firm,” Boric stated at a news conference in Santiago. “Chile has both the right and the responsibility to engage in this business.”
In Chile, only two businesses manufacture lithium: US-based Albemarle Corp. and local firm SQM, in which China’s Tianqi Lithium Corp. owns more than 20%.
They primarily produce lithium carbonate, more than 90% of which is exported to Asia.
Both SQM and Albemarle extract massive volumes of brine from beneath a salt flat in Chile’s northern desert and store it in massive evaporation ponds for a year or more. The resultant concentration is processed at adjacent factories into lithium carbonate and hydroxide before being sent to Chinese and Korean battery manufacturers.