At the beginning of the year, when winter is still ahead and no one knows how mild it will turn out, especially for countries in northern Europe such as Germany, German Chancellor Olaf Scholz did not seem to be too worried about natural gas sufficiency. in Europe’s largest economy. Rather, he prioritized the need to ensure access to raw materials for the production of batteries for electric vehicles, namely those needed by the German car giants Mercedes-Benz and Volkswagen.

Cooperation agreements with countries located in the “lithium triangle” were recently signed by Olaf Solz.

The reasons are clear, as the urgent need to switch to electric mobility coincided with a heart attack in supply chains, a consequence of the pandemic and strained relations between the West and China. Thus, it has ousted countries such as Germany, as well as the EU. in general, in search of raw materials, on the one hand, turning them to friendly countries, and on the other, trying to increase domestic production. And the alternative to the West for independence from the power of China is the countries of Latin America, to which the German Chancellor addressed.

This may be the only alternative for the West, notes Patricia Vazquez, a lithium specialist at the Wilson Center think tank, since Latin America is the only place where refined lithium is produced outside of China. Thus, the countries of South America see the advantage that the situation gives them and try to capitalize on their mineral wealth. The governments of Chile, Argentina and Bolivia are setting up state-controlled lithium companies, which are at various stages of development.

While touring the wider region, the German chancellor stopped in particular at Argentina and Chile, two countries located in the so-called “lithium triangle” of South America, where the metal’s largest reserves are located. And he signed agreements on mining cooperation with them with the prospect of some better conditions for cooperation, which, in theory, can also distance these countries from cooperation with China. A few days ago it became known that Germany is preparing to reopen a mine near the Black Forest, which remained closed for 27 years due to the influx of cheap raw materials from China.

This is the Keferstay mine, which sits on top of Europe’s largest reserves of silver diamond, a key component in batteries, albeit completely unknown compared to lithium, cobalt and nickel, which are more widely known for their role in electric vehicles. It is estimated that about 10 kg of the metal in question is required to manufacture a battery for a Volkswagen ID.4 electric car. It is estimated that EU demand for silver alloy will rise from 755,000 tons per year in 2020 to around 1.1 million tons by the end of the decade to support the transition to electrification.

In short, the abandoned mine is once again needed by German industry, as it has rich reserves of metals needed to produce batteries for electric vehicles. Germany has been importing them from Mexico in recent decades and is now trying to regain its self-sufficiency.

Chile plans to control lithium

At a time when European countries are turning to South America for raw materials for electrification, the Chilean government plans to take control of the main lithium production facilities. Its goal is to develop the huge reserves of metal that have been exploited for decades by just two industries in the country and are the largest in the world. These are the American Albemarle and SQM, the Chilean industry, in which the Chinese Tianqi Lithium Corp. controls over 20%.

It should be noted that 90% of the products of these two industries are in Asia and mainly in the production of batteries in China and South Korea. While Chile and Australia account for most of the world’s lithium mining and production, China controls more than 50% of the total metal processing and battery processing capacity.

Two industries, which are also the largest in the world, use the metal reserves.

However, according to Maximo Pacheco, president of Codelco, Chile’s national commodity company, who has negotiated with the two companies on behalf of the state, Chile is determined to take control of its mineral wealth. Speaking on this occasion in the Financial Times, he said a few days ago that the state plans to buy out more than 51% of joint ventures with manufacturers. “We have to resolve this issue within a year,” he says, referring to “the sense of urgency we all feel because of the prices and high demand for lithium in the world.”

The government’s plan to increase the state’s share was announced a few weeks ago by President Gabriel Borik. However, we are not talking about the nationalization of lithium, as Santiago basically proposes cooperation between the state and the private sector, while the government emphasizes that it will respect the duration of existing contracts.

Of course, according to market participants, Santiago’s move will provoke a reaction, although it may push the two companies to invest elsewhere. SQM, a controversial company with mining contracts until 2030, is 22.16% controlled by China’s Tianqi Lithium, whose largest shareholder is Julio Ponce, the former son-in-law of former dictator Augusto Pinochet. It brought in more than $5 billion to the state treasury last year and is expected to resist the government’s move to take control of production.

According to José Hofer, a former employee of the company, SQM will soon announce its plans outside of Chile and will likely turn to Africa, as most Chinese companies have done.

Mines reopen in EU, plans for new production

Germany is trying to autonomously move and supply its industry with raw materials, but at the same time, the EU, of which it is a member, is trying to secure the supply of critical raw materials, while setting targets to increase domestic production. Within the framework of the draft law on critical raw materials, E.E. established quotas for domestic metal production, while softening the regulatory framework for mining. Very promising is the strategically important deposit of rare earth elements, the largest in Europe today, which has been discovered in the Arctic part of Sweden for several months.

It is estimated that there is one million tons of rare earth oxides, but it will be a long time before they can be used. Meanwhile, among the 34 commodities the Commission registers on the list of strategically important metals is silver diamond, the base metal of the Keffershtetz mine in Germany.

Kefferstein is located in a wooded area in the southwest of Germany, in particular in Baden-Württemberg, near the city of Pforzheim, which is the center of the jewelry and watch industry. Kefferstay’s story illustrates how Western economies lagged behind critical raw materials for the new economy and regained interest in their neglected mineral wealth. The mine began operation in 1935, when silver diamond was mainly used in metallurgy, as it has the ability to lower the melting point in the production of aluminum and steel.

In short, it contributes to energy efficiency and energy saving. However, in the 1990s, the industry was in crisis, and the reason was the same that at times brought many industries to their knees. The market was swept by a wave of cheap Chinese-made silver bars, which led to a decrease in prices for the metal. Therefore, Bayer, which then owned the mine, decided to close it.

Prices have risen sharply since then and hit a record high of €700/t in the summer of 2022 as demand for the metal soared. Kefferstay is estimated to have about two million tons of silver diamonds and could produce 100,000 tons per year from 2029. In this case, it will be able to cover 40% of demand in Germany and 13% of demand in the EU. Meanwhile, London-listed Zinnwald Lithium plans to develop a huge lithium deposit on the Czech-German border, and Vulcan Energy Resources plans to mine lithium from thermal waters near Karlsruhe in southwest Germany.

Ursula von der Leyen

The President of the European Commission recently underlined the need to provide the EU with raw materials for electrification and high technology, stressing that “lithium and rare earth elements will soon become more important than oil and natural gas, and by 2030 our demand for rare earth elements will grow five times.”

98% nickel oxide used by the EU brought from Russia.

Olaf Soltz

Highlighting Germany’s intention to find alternative lithium suppliers, the German chancellor recently stressed that “it seems that all the raw materials come from China, but this is not true, because a lot of the raw materials come from Argentina or Chile, they are exported to China.” where they are processed and sold again.”

72% from rare land used by the EU is imported from China.

One way

Patricia Vasquez, a lithium specialist at the Wilson Center think tank, recently noted that “in the short term, the West is not
a different choice than Latin America because it is the only place outside of China where lithium is produced and processed, and today this is a great advantage of the region.”