A series of recent reports have identified Latin America as an essential supplier of critical minerals for the world’s clean energy future.
International financial information and analytics specialist, S&P Global, recently suggested that Latin America, with the world’s largest deposits of both copper and lithium, is critical to the global energy transition.
However, it also noted that the region faces social, political, environmental, and financial challenges to increase mineral extraction and processing capacity to what is needed.
In a recent S&P Global panel discussion, Tom Moerenhout, a research scholar at Columbia University’s Centre on Global Energy Policy, said that Latin American copper and lithium production will decide the pace of the transition.
He noted that while American countries have a very high share of lithium reserves, the region has a much lower share of global lithium production. With the increased shift to electric vehicles (EVs), it is projected that North American lithium demand will face a 12.5% deficit by the end of this decade.
“These are huge numbers,” Moerenhout said. “When you worry about fluctuating and increasing prices, you have that effect when you have a tight market with potential supply deficits, which is where we are at today. So, imagine a 12.5% deficit that is going to be passed through in battery costs and EVs costs.”
Latin American lithium is important, he said, as it is produced from brine, which is more easily processed into lithium carbonate, which goes into lithium-ion phosphate batteries.
“These batteries are cheaper and they are safer and very important to [the] energy transition.”
Looking at the copper market, a 15% to 20% supply deficit is expected by 2030, according to S&P Global research.
Moerenhout continued, “Keep in mind, when you have a supply deficit, your price goes up and your markets react.”
Building new mines, however, takes at least 10 years with the average for critical mineral mines in recent decades standing at 16 years, he said, attributing the data to the International Energy Agency.
“Even if your market responds, and it will, the response will be slow.”
Environmental and social challenges
María José Baptista, interagency and intergovernmental affairs officer for the United Nations Environment Programme, said as Latin American countries ramp up production of critical minerals, countries need to create safeguards for people and the environment.
She pointed to Bolivia as an example. The country has 21Mt of lithium, more than any other country in the world, but produced less than 1% of global supply in 2021.
Baptista continued, “There’s a lot of potential there, but how to do this in a way that will benefit locals (and) that will protect the environment? It’s a difficult task.”
Policy challenges
Governments are looking to take advantage of opportunities brought on by the energy transition to benefit their countries long term.
In Chile’s case, it represents 36% of global lithium reserves and 23% of global copper reserves, said Juan Carlos Jobet, distinguished visiting fellow at the Centre on Global Energy Policy and former minister of energy and mining for Chile.
“Without mining, there is no energy transition. Full stop.”
Jobet added, “So whatever happens in Chile, mining is very important for the energy transition, if the country that produces 30% of the world’s copper slows down production, the impact that’s going to have on price, and then the adoption of green technology is going to be huge.”
South American lithium scramble
In its report, Latin America’s Lithium: Perspectives on Critical Minerals and the Global Energy Transition, the Wilson Centres’ Latin America Programme noted that the region has enormous potential to supply the lithium needed to drive the global energy transition.
This flagship report also reflected on the scramble for lithium in South America, how opposition to lithium mining in local communities could curtail production, and how improving regulations regarding water use is critical to ensure a sustainable lithium industry in the region.
According to the report, the extreme climate of the Andes is at the centre of an epic revolution, one that will transform a global economy that runs on fossil fuels to one fuelled by renewable energy.
“The same Andes that forged Chile and Argentina’s path to independence are today enabling that global energy transition and spurring local economic growth. That is because energy transformation is only possible thanks to the lithium-ion battery (LIB) that allows for the storage of renewable energy. Small LIBs store energy in the portable electronic devices we depend on daily, while the larger LIBs power EVs.
Chile has the world’s largest known reserves of lithium, followed by Australia, Argentina, and China. Lithium is found in three types of deposits: clay, hard rock, and brines. Today, lithium is primarily produced from hard rock in Australia, and high-altitude brines in Chile and Argentina. China has both hard rock and brine deposits.
Three countries – Argentina, Bolivia, and Chile – comprise the Lithium Triangle, home to over 60% of the world’s lithium resources.
IEA identifies critical minerals opportunities
The International Energy Agency’s (IEA) report Latin America’s Opportunity in Critical Minerals for the Clean Energy Transition states that the region is an established producer of several minerals essential for clean energy technologies and could build on its well-established mining sector to diversify into new minerals and help the global economy avoid the shortfalls and bottlenecks that could threaten clean energy transitions.
The IEA study noted that Latin America accounts for 40% of global production of copper, led by Chile (27%), Peru (10%), and Mexico (3%).
“Today, the region supplies 35% of the world’s lithium, led by Chile (26%) and Argentina (6%), the second and fourth largest global producers, respectively. The region holds more than half of global lithium reserves, mainly located in Argentina (21%) and Chile (11%). Bolivia also holds huge untapped lithium resources, almost comparable to the size of today’s global lithium reserves, although the lack of infrastructure hampers them from being economically viable.”
“Moreover, the region’s lithium – predominantly lithium carbonate from brine – produces fewer emissions than mining from rock and could benefit from the growing adoption of lithium iron phosphate batteries.”
“Latin America could therefore have an even more important role to play in meeting rapidly rising global demand for lithium. The region’s lithium exploration spending more than doubled over the last decade, from US$44M in 2010 to US$91M in 2021, and there is scope to step up activities even further given that the region’s share in global exploration spending fell from 52% to 36% over the same period.”
The report also noted that beyond copper and lithium, Latin America has significant potential in graphite, nickel, manganese, and rare earth elements production. Brazil alone holds around one fifth of global reserves in each of these resources, but as of today produces only small to moderate amounts, between 0.2% of global production of rare earth elements and 7% of graphite. Latin America has not yet attracted sufficient investment in line with its potential. For example, only seven per cent of the global exploration budget for nickel and rare earth elements is allocated to the region.
