Chilean President Gabriel Boric in a televised national address announced on Thursday plans to nationalise the lithium industry in a bid to boost the country’s economy and protect the environment. Lithium is the key mineral for the batteries that will run the electric vehicles (EVs), the future of global automotive industry, and therefore it becomes a key element in future economic development and rivalries because the countries that have deposits of lithium will call the shots.

Chile has the second largest lithium deposits next to that of Australia. It is China that is the largest consumer of lithium for building its EVs. Boric said, “Today we present a national lithium strategy that’s technically sound and ambitious,” that will build a Chilean economy “that distributes wealth we all generate in a more just way… This is the best chance we have at transitioning to a sustained and developed economy. We can’t afford to waste it.” He said that he had asked the largest copper producer, the state-owned Codelco, to find ways to set up a national lithium company. He said that he will get the Congress’ approval, which will be a hurdle because the Congress is dominated by the opposition conservatives.

The Congress had earlier rejected a draft constitution that was radical in extending rights to indigenous communities. Government sources in Chile also clarified that the word ‘nationalisation’ is wrong because government would work on the basis of a public-private partnership basis. It is interesting that 50 years ago, another leftist President, Salvador Allende, got into trouble when he expropriated American companies owing copper mines in the country and his government was overthrown in September, 1973 and Allende committed suicide according to a post-mortem done in 1990 when his body was exhumed. There is the strong suspicion that the Central Intelligence Agency (CIA) had a hand in the fall of the Allende government.

Two of the existing private companies in lithium mining, SQM and Albemarle, working in Chile have contracts till 2030 and 2043 respectively, and these contracts are unlikely to be disturbed. But it has been said that the state would like to be a stakeholder in the enterprises. Albemarle supplies lithium to Tesla, the Elon Musk-owned electric vehicle manufacturer, while South Korea’s SK On has a long-term supply contract with SQM. Cho Hyunryul, an analyst at Samsung Securities, said, “When or if battery-makers renew their contracts with lithium firms in Chile, contract conditions would likely become more difficult than what we saw in the past when there was no state involvement.”

Analysts seem to feel that Australia, with is largest lithium deposits, could be a beneficiary if auto-makers and mobile phone-makers were to turn to Australia for a hassle-free supply of lithium. Harsh Bardia, National Australia Bank’s private wealth arm JB Were’s analyst, said, “Policy stability is very important for any mining project…Mining-friendly jurisdictions like Australia will be places when incremental funds will get invested.”

Key South American countries like Chile, Bolivia and Argentina with their lithium deposits are expected to form a cartel on the lines of OPEC to get a better deal in trading terms for the strategic mining input which is so crucial for future transport. It is to be seen whether these countries can use their control of lithium mines to improve their economies. The demand for lithium will grow for the next half-century and more. It is also an issue of how much lithium would be needed to make the global automotive industry a totally battery-run one. The realistic assessment is that fossil fuels and electric vehicles will co-exist and one cannot phase out the other for a long time to come because the technology for electric vehicles has not been mastered well enough.