A Chilean court suspended a lithium contract that had raised controversy. Just days ago, Chile’s Ministry of Mining awarded BYD a contract to extract 80,000 tons of lithium as BYD offered US$61 million for the extraction over 20 years.
The minister of Chile’s Ministry of Mining had said that the government would work with companies to make sure that “a proportion of the payments will be used to support local communities and to invest in R&D.”
However, the good intentions did not save the contract.
The court accepted an appeal for protection filed by the governor of Copiapo, Miguel Vargas, along with some indigenous communities that inhabit a salt flat in the Atacama desert.
According to the official statement, the tender was not subject to a “definitive cancellation” and the process of bidding had been “open, informed, transparent, and conformed with laws and regulations”.
For years, Chile had been the world’s largest producer of lithium, with 37% of the market share. After 2016, the share dropped to 31%, falling behind Australia. If this trend continues, Chile will see the share fall to 17% by 2030. As a result, the latest round of bidding for lithium extraction contract was the country’s effort to avert the trend and meet the growing global demand for more EVs.
To some extent, BYD’s broken contract was a result of division between the outgoing administration and the incoming one. Leftist president-elect Gabriel Boric’s team had asked the government to postpone the tenders and set up a “roundtable” to discuss various conditions to apply to the contracts. After one of the contracts went to BYD, the news sparked strong opposition in Chile and protestors expressed concerns over the privatization of the valuable natural resource.
This drama reflects new energy vehicle companies’ growing difficulty in accessing the raw materials overseas.
