“As lithium industry grows and matures, every year and its macro-economic importance becomes more evident, it increasingly starts to face a very specific set of opportunities and challenges in response to growing interest of regulators, academia and wider public, expressed through higher level of scrutiny, new regulations with a potential impact on the industry, need for an objective information supported by a robust data and environmental concerns.”
“From within, there is a space for improvement in terms of common standards, safer trading environment or provision of quick and amicable dispute resolution services. Lithium Trade Association, gathering lithium market and industry stakeholders will aim to make the best use of the opportunities and effectively address the challenges affecting the industry as a whole through leveraging the collective strength of its members, over the capabilities of a single entity to act on the issues of common interest, in most efficient and cost effective manner.”
WITH EXPERT, ON LITHIUM (SERIES)
The interview with Juan Carlos Zuleta, starts a series of interviews with leading lithium market and industry experts, who in the era of ubiquitous social media might be as well called “influencers”. Juan Carlos journey with lithium started very early-on, when lithium was much more of the niche than it is today. His ability to put developments on lithium market in historical perspective makes for the extremely interesting reading.
Lithium Today (LT): How have you started following the lithium market? How come, you’ve got interested in this space?
Juan Carlos Zuleta (JCZ): That’s a very long story. It begins well back in the 90’s when I was studying in New York. I was doing a PhD in Economics and I came across the contract that the Government of Bolivia signed at the time with FMC Corporation. I am specifically talking about February 1992 when the Government of Bolivia signed a contract with FMC Corporation to start a project in Salar de Uyuni. This project didn’t materialize because when the contract was submitted to Bolivia’s congress, the congressmen found some difficulties to accept it as it was, because there were some things they did not like. For instance, there was a clause concerning a duration of the contract. This called for 40 years, without any obligation on the part of FMC to exploit one gram of lithium. And also FMC was not willing to accept a change in the percentage of value added tax that had changed from 10% to 13%, right in the middle of the negotiation process. They thought that since they had signed the contract in February and the value added tax changed in May, they should not pay the new taxes. This was also unacceptable for the congressmen at that time so the company was very discouraged and finally abandoned Bolivia in January 1993, and moved instead to Argentina.
LT: But I think looking from perspective the conditions to extract lithium from Bolivia right now, are more onerous than they were before…
The image presented to foreign players in lithium sector, regarding economic, political and social environment in the South American Lithium Triangle is usually very simplified. It paints a picture of stable and growing Chile, Argentina getting back on track with its technocratic leader and regional enfant terrible Bolivia with its populistic – and hence by definition labelled as business unfriendly policies. More detailed analysis of socio-economic and political situation in these countries rarely reaches lithium industry decision makers and analysts. The Chinese quest for dominance in lithium and battery sector best reflected by a series of bold acquisitions and investment, concluded or attempted is also rarely discussed in a wider geopolitical context of changing US foreign policy, particularly in relation to Latin America and in context of frantic attempts to regain a level playing field by large Korean and Japanese corporations. We aim to fill-in this gap and re-examine some of those commonly hold perception and believes by taking a more macro view and providing a reader with better understanding of local realities.
Chile’s flawed image of stable democracy
Since it’s embrace of democracy in 1990 Chile became a model of development – politically and economically for its South American peers. Yet with rising inequalities, as illustrated by growing Gini index (Chile outranks Nigeria and is in top 25 of most unequal economies) and wide disenchantment with politics embodied by falling voting turnout rates (In 1989, 86 percent of voters cast a ballot. In last election only 46 percent did, with decline in turnout especially among poorer parts of society – who traditionally were more likely to vote left). Chile’s image has been tarnished. Future also remains uncertain. On one hand we have a right-wing president, detached from liberal society being in favor of extended abortion rights, stricter environmental protection measures and rights for sexual minorities. On the other, leftist government promising to curb corruption in which elites drawing its power from the time of Pinochet have been involved – failing to deliver while the left’s leader family member gets entangled in land dealing scandals.
All lithium production estimates that we have encountered are quiet opaque regarding the methodology and data sources employed. They state the number of total production without quoting the exact sources, based on which estimate is build. Moreover, as per our previous article, the only free of charge report available including global lithium production estimates, published every year, comes from USGS. For most of commodities with high geopolitical and macroeconomic importance, there is usually more than one free of charge source available.
Rightly so, as this opens up the room for further discussion and cross checks the validity of estimates. Since business decisions are often based on commodities supply and demand estimates, we believe that they should be transparent, discussed and continuously improved, for any commodity and raw material.
Lithium Today looks at an ambitious and innovative project of tracking and forecasting lithium production from space. Read on how we could use satellite imagery to give you an edge in the market.
Satellite technology experiences a quiet revolution. It is driven by an entry of privately-owned SMEs into the market, which through most of its relatively short history has been dominated by governments with its closely guarded secrets.
At that time satellites have only existed in one dimension. They were massive. Their huge size has been to large extent derived from doubling and tripling devices on board to make their probability to fail when in space very small. From time to time they have failed nevertheless.
At some point engineers working with governments realized that instead of trying to build one fool proof expensive satellite which may still fail, it would make more economic sense to perhaps build a series of small, light, cheap satellites that could work together in constellations, even if it means that some of them will surely quickly become dysfunctional.
Cobalt27 is likely to hold one of the largest stocks of physical cobalt in the world, through its fund. Anthony Milewski, its CEO brings us closer to the nature of this business and shares his views on the involvement of financial players in physical minor metals market.
Lithium Today (LT): Maybe at first let’s get back in time a bit. When was the first time when you realized that cobalt prices may skyrocket.
Anthony Milewski (AM): I don’t think at first we were focused on price, we were focused on demand. We started looking at EV revolution and basic materials that it was based on. We were looking at nickel, copper, lithium in particular. Each one had its own supply and demand dynamic and one of the unique things about cobalt was its importance inside batteries chemistries. We immediately could see tremendous growth in demand in coming years, immediate future but also in the coming decades. It really sparked our interest in thinking about what that demand will mean for cobalt in the coming years.
LT: When was it in terms of years?
AM: It’s been about two and a half, three years, now.
LT: Have you ever considered investing in lithium in any form?