Lithium’s place in Chile’s social unrest

Chilean riots started the week of the October 14 2019.

What began as a simple call to evade paying for public transportation by high school students (due to a slight rise in subway fare) ended up becoming the most significant riot of the last 100 years.

This triggered a wave of protest unseen since the return to democracy in terms of social demands: modifying the pension system, increasing minimum wage, strengthening consumer laws, freezing basic services tariffs, among many others. There is a before and after this week for Chile, in fact one of the most popular demands is to write a new constitution.

The question for the lithium market, which was responsible for nearly a third of global production last year, is how it will be affected by these social demands. In the short run the effects will not be noticeable: a couple of isolated events in Atacama, specifically in Peine and mainly associated with logistics.

However, in the long run there is an important discussion regarding natural resources and property rights. Water use is currently a big issue, and when related to the extraction of lithium then public opinion is even more negative.

The understanding of the specifics of water usage in the Salar, however, is often lacking.

From a technical point of view, production of lithium is not a fresh-water intensive process. That is, the only resource being evaporated is brine, without affecting fresh-water use in the area. Additionally, the monitoring system in the Atacama is by far the best from a hydrogeological point of view.

Even if there are several voices asking for a higher degree of involvement by the government (some even demanding nationalisation), environmental requirements and enforcement by the Chilean EPA are quite robust.

For SQM and Albemarle, being two responsible and capable lithium producers in the Atacama Salar, the new social scenario in Chile will drive several challenges with respect to lithium production.

Nevertheless, today the commitment of the mining industry with communities and royalties paid in Chile are significant. In fact, this level is even higher than other industries in Chile.

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