Global lithium demand is surging. Lithium prices are soaring.
For countries with an abundance of the mineral, and other battery metals like nickel and cobalt, the possibility of increasing their influence over the global supply of these sought-after commodities is a lucrative prospect.
Electric vehicles and energy storage systems will drive the bulk of lithium demand in coming decades. And as the EV revolution takes off, lithium demand is forecast to outstrip supply.
“The battery will be the defining technological and supply chain battleground for the industry in the next decade, and access to their constituent raw materials will be crucial,” S&P Global noted in a report published this week on EV raw materials.
One way for mineral-rich nations to secure more pricing power is to set up a cartel like the 13-member Organization of Petroleum Exporting Countries (OPEC), whose decisions to cut or increase oil production has global ramifications on crude prices, foreign policy, and the world economy.
Now, interest among major battery mineral producing nations to set up OPEC-like groups is gaining traction from Southeast Asia to South America.
Indonesia wants to build a battery minerals OPEC
This week, Indonesia’s investment minister told the Financial Times that the country was considering setting up mechanisms modeled after OPEC to have greater control over the supply and pricing of metals and minerals critical for the global energy transition from fossil fuels.
“Indonesia is studying the possibility to form a similar governance structure [to OPEC] with regard to the minerals we have, including nickel, cobalt and manganese,” Bahlil Lahadalia said in an interview with the newspaper.
He added that Indonesia is working on a proposal to pitch the cartel initiative to other major nickel producers.
“Lithium triangle” countries are eyeing a “lithium OPEC”
Meanwhile, in South America, talk of establishing a“lithium OPEC” is gathering pace.
Telam, Argentina’s national news agency, reported last month (link in Spanish) that foreign ministers from Argentina, Bolivia, and Chile are in “advanced talks” on creating a mechanism that would give them control over lithium prices “at a global level.”
Like Indonesia, the three countries—often called the “lithium triangle” because they represent 58% of the world’s identified lithium resources (pdf)—are hoping to get other major producers on board. According to Brazil’s Rio Times, the trio of foreign ministers hope to have Australia, the world’s leading lithium producer, in the proposed lithium cartel.
How would a battery minerals OPEC work?
It’s not the first time the idea of an OPEC-like cartel for non-oil commodities has been floated.
The economist C. Fred Bergsten, for example, wrote in 1976 about “a new OPEC in bauxite,” the ore used to make aluminum. And in 1974, four major copper-producing countries formed an OPEC-inspired copper cartel, called the Intergovernmental Council of Copper Exporting Countries (CIPEC).
For now, there are few details about how a battery minerals cartel or a “lithium OPEC” would work. But there are at least two major factors that could complicate the establishment of such a cartel, or reduce its influence.
First, governments’ opinions on how to manage national mineral resources may not align.
“In South America, for example, there is a very differing political landscape, meaning views on how to exploit lithium resources in different countries vary massively, and as such this could easily act as a stumbling block towards forming a ‘cartel,’” said Daisy Jennings-Gray, an analyst at the consultancy Benchmark Mineral Intelligence in an email.
China has a lot of sway as a major lithium processor and consumer
Then there’s the question of China.
China is the world’s largest producer of EVs, and currently commands 58% of global lithium processing capacity, even though it has barely 6% of global identified lithium resources.
That means lithium producers would still be reliant on China to process the raw material into usable form, or to purchase the processed lithium carbonate or hydroxide for use in batteries.
In the medium-term, any cartel “would still be pretty dependent on China being its main customer, and thus China would still hold some power in this agreement,” said Jennings-Gray. “On a longer time frame, it’s harder to say, as various regions develop their own battery hubs and thus some demand shifts away from China.”
China buys influence by investing in foreign lithium projects
Plus, China is heavily involved in lithium mining projects in South America. Indonesia is also reliant on Chinese investment to develop its nickel and cobalt projects. For example, a major cobalt project there is PT Huayue, a joint venture on the Indonesian island of Sulawesi established by China’s Tsingshan Holding Group and China Molybdenum. So China, through its overseas investments, would also be able to exert influence over any mineral cartel.
Shifting geopolitical winds could change that, however. This week, the Canadian government ordered three Chinese firms to divest from three Canadian lithium mining companies, citing national security.
Two of those Canadian firms, Ultra Lithium and Lithium Chile, have lithium projects in South America. The other, Power Metals, has lithium projects in Canada.
Ottawa’s divestiture order comes after a Chinese state-owned company’s acquisition last year of Canada’s Neo Lithium, which has a major lithium project in Argentina, sparked national security concerns.